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    Striking a Balance for Future Growth

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    Scalability, security and decentralization. The so-called “blockchain trilemma” refers to the challenge of balancing these three critical functions that underpin blockchain technology.

    On the one hand, blockchain needs to be scalable to support widespread use. This means it must be able to handle large amounts of transactions and throughput.

    On the other hand, it also needs to be secure and decentralized. These latter aspects offer unique advantages such as tamper-proof reliability and censorship resistance. But emphasizing one characteristic seems to come at the expense of others.

    Increasing transaction speed, for example by centralizing validation, weakens decentralization. How can we increase scalability while maintaining security and decentralization? This persistent puzzle is known as the blockchain trilemma.

    This article explains what the blockchain trilemma means and how it works.

    Let's get started right away.

    What is the blockchain trilemma?

    The core of the blockchain trilemma arises from the difficulty of achieving three key characteristics simultaneously in a distributed ledger system.

    Scalability – Features that support increased transaction volume and throughput. This includes parameters such as transactions per second (TPS), block size, and bandwidth.

    safety – Resistance to attacks such as hacking and ledger manipulation through features such as encryption and consensus rules that make it computationally difficult to tamper with.

    decentralization – Decentralized control and participation in verification through nodes across many locations and entities, rather than centralized authority.

    scenario:

    As Bitcoin becomes more mainstream, its limited capacity of 7 transactions per second becomes difficult to meet user demand. Simply increasing the block size allows more transactions to be processed, but risks concentrating validation control solely in the hands of the megaminers.

    Alternatively, using a layer 2 network like Lightning allows you to scale while remaining decentralized, but with added complexity and slightly less security. Bitcoin currently faces a trade-off between its three key ingredients: mass processing power, decentralized control, and bulletproofness against hacking.

    In the impossible trilemma of achieving scalability, security, and decentralization at the same time, improving one aspect seems to impede at least the other. Most blockchains face these inherent tensions as they strive for mass adoption.

    Scalability challenges facing blockchain

    One of the major hurdles facing blockchain platforms is scalability, or the ability to support rapidly increasing transaction volumes and data as adoption grows. Currently, public blockchains still process some of the mainstream payment processors like Visa.

    For comparison, due to technical constraints, Bitcoin has a maximum of 7 transactions per second (TPS), while Ethereum is around 15 TPS. However, Visa processes an average of 1,700 TPS on a daily basis and can peak at around 56,000 TPS. A large gap exists between current blockchain capabilities and the throughput required for global adoption.

    This limited capacity leads to network congestion and higher charges during periods of high activity. This has already been witnessed in the past with Bitcoin and Ethereum. Users are fiercely competing for scarce space on the blockchain. Without a meaningful scalability solution, further deployments can stall progress.

    Potential scalability solution

    • Sharding – Sharding divides transactions into smaller datasets called “shards.” These shards are concurrently processed in parallel by the network, allowing many transactions to be processed sequentially at the same time. This doubles capacity as nodes reach consensus at the shard level instead of the entire blockchain.
    • Layer 2 protocols – Process transactions off-chain before batching the final results to the underlying blockchain. These “second tier” networks greatly alleviate congestion by moving activity off the main chain. The Lightning Network provides one such layer 2 solution for Bitcoin and Ethereum.

    Maintaining security

    Robust security is a fundamental pillar supporting the appeal of blockchain. By design, these distributed ledgers are intended to provide tamper-proof trustlessness between transacting parties without intermediaries. This requires a model that strongly prevents hacking and manipulation of recorded data.

    Consensus protocols play a key role in enhancing durable security. His Proof-of-Work (PoW), used in Bitcoin, requires miners to expend computational “work” to validate transactions and create new blocks. To attack the network, you will need to accumulate more than 50% of its processing power, which is currently not economically possible.

    Proof-of-stake (PoS), on the other hand, selects a validator to stake crypto coins as collateral to verify transactions, and will be cut if they misbehave. Securing blockchain networks with encryption and penalties enables trustless peer-to-peer exchange globally.

    However, the emerging threat landscape means that blockchains must continue to improve their security to stay ahead of attacks through features such as improved cryptography, resilient consensus rules, and mechanisms such as hardware wallets. means. User growth also requires balancing the demands of security and scalability.

    Maintaining decentralization

    Decentralization is another central mantra in blockchain philosophy, eliminating central points of failure. Distributed operations across thousands of nodes around the world make censorship and manipulation much more difficult compared to centralized backends.

    Enhancing transparency through a publicly distributed ledger instead of a private database that can be hidden makes decentralization even more appealing.

    However, many of the technical shortcuts proposed around the trilemma tend to gradually concentrate power in the hands of a small number of verifiers and developers. For example, adopting KYC-based permissions would reintroduce gatekeepers while shifting consensus participation to large, asset-rich stakeholders, contradicting the ethos that underpins decentralization.

    The consolidation of such controls threatens transaction validation and resistance to censorship within the app development ecosystem.

    Therefore, the blockchain industry must remain vigilant against architectural choices that may unintentionally undermine open participation and decentralized authority. When networks lean toward centralized governance by individuals or small groups, the benefits of decentralization are diminished.

    Overall, maintaining blockchain's core features of security and decentralization involves significant trade-offs with the demands of scaling transaction throughput. But sacrificing too many of these pillars risks diluting the very aspects that make blockchain technology a uniquely transformative force.

    Case Study

    Examining the two largest blockchain networks, Bitcoin and Ethereum, provides insight into the unique trade-offs they make when it comes to scalability, security, and decentralization.

    Bitcoin prioritizes security and decentralization first. Its proof-of-work mining ensures decentralized participation and resilience against manipulation by state actors. However, the consensus model currently limits Bitcoin's speed to less than 10 transactions per second. Additionally, the small average block size of 1 MB limits capacity and contributes to decentralization as miners dominate verification.

    Ethereum takes a slightly more balanced approach between the three aspects. Moving to proof of stake increases the potential for scalability while allowing decentralized participation in verification. The high throughput of approximately 15 TPS is also achieved by faster block creation times than Bitcoin. Additionally, Ethereum has expressed a greater emphasis on decentralization in the development of its smart contract ecosystem.

    However, Ethereum's scalability still lags significantly compared to traditional payment processors. Its increased adoption has also revealed the current trade-off between transaction speed and fees. And staking’s certified validator status, as opposed to purely permissionless participation in Bitcoin mining, risks increasingly centralizing control.

    Overall, both networks have historically been biased towards security and decentralization rather than pursuing raw scalability numbers. But those typical trade-offs highlight how difficult it is to achieve an ideal balance across an impossible trinity.

    Platforms that enhance a single trait appear to at least trade off other traits accordingly. As underlying platforms mature, managing the inherent tensions along the trilemma can separate the most successful companies from the rest.

    possible solution

    The blockchain space is actively exploring innovative approaches to realize the vision of a fully decentralized platform that can handle massive transaction volumes and guarantees airtight security. New options include:

    Directed Acyclic Graph (DAG): DAG-based distributed ledgers like Hedera Hashgraph disseminate validation across network participants via gossip protocols and asynchronous communication. By replacing blocks with DAG data structures, we seek to achieve speed competitiveness with payment processors without the decentralization issues associated with mining.

    secondary sharding: this Sharding By dividing nodes into randomized shards and processing transactions concurrently, this technology promises improved sub-linear scalability as the network grows. If shard security vulnerabilities can be addressed, such an approach could significantly increase transaction load.

    hybrid model: Bridging the permissionless decentralization of the base layer with the computational scalability of permissioned blockchains in the upper layers has the potential to balance both worlds. This allows you to maintain the security and decentralization of high-value transactions while providing scalability for more flexible needs.

    Also read: Blockchain vs. Hashgraph vs. DAG – Which is the best DLT?

    Conclusion:

    As blockchain platforms scale up and compete for supremacy, those that optimally solve the trilemma while maintaining user safety and decentralization will gain a significant competitive advantage.

    However, if dominant platforms cut corners when it comes to decentralization and security, they risk losing their uniqueness, especially vis-à-vis traditional finance.

    Therefore, the trilemma has a significant impact on the continued adoption of blockchain technology. It serves as an unofficial reference point for technological evolution in the crypto world.

    Therefore, platforms need to reduce trade-offs and inch closer to the sweet spot between the trifecta of scalability, security, and decentralization. Once we get there, the truly breakthrough and mainstream potential of blockchain technology will be unleashed around the world.

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