The astonishingly Bull Run of Bitcoin in 2017 made Blockchain enthusiasts start looking into Blockchain scalability. Due to the popularity of Bitcoin in 2017, the Bitcoin Blockchain reached its current limitation in transaction throughput. There were more people trying to use the network than the network can handle. This led to an increase in transaction fees required for one user to transfer BTC to another user.
The bottleneck brought up debates on the issue of scaling the Blockchain network. Although scalability in general terms means the capability of a system to handle an increasing amount of work, it has a broader meaning in the Blockchain domain. You may have come across the chart comparing the transaction speeds of cryptocurrencies to PayPal and Visa.
Visa can process about 24,000 transactions per second (tps) whereas bitcoin can only handle seven transactions per second. On the other hand, Ethereum can only process 20 transactions per second. Before Blockchain can reach mass adoption, it is imperative to address the issue of Blockchain scalability.
To help you understand these concepts, consider this interesting example. Imagine you are waiting at the train station to catch a train to your home. It takes the train 15 minutes to get to the train station, and 45 minutes to arrive at your destination. However, there is another twist, it is a popular route and there is always a long queue.
It is after 15 minutes and the train has arrived at your waiting station but there are several people ahead of you in line. Therefore, you will have to wait another 15 minutes before you can catch a train home.
|Waiting time to get onto a train
|From the train station to home
|Total travel time
|Capacity of train
|10 person/minute (60/10)
Now let’s explain throughput, finality, and confirmation using the concepts above.
You should note that measurements in throughput (tps) are not enough, and we need to also consider confirmation time. It’s not enough for a protocol to process up to 100, 000 tps if it will take a 2-day confirmation time. Therefore, when there is congestion in the network, throughput will remain the same (since the train can still carry 10 people per minute).
However, the confirmation time will increase because of long waiting times for the first block. The Finality is fixed as the “6 blocks confirmation” waiting time we need to ensure the block is not reversible. Depending on the situation, the average block waiting varies.
More nodes will be needed to process the increased traffic caused by more users and an increased number of transactions. The running cost to all these are enormous, and miners have a preference for transactions with higher fees. It means that having a transaction verified in time during peak times can move from a fraction of a cent to a few dollars. There is no way to tell how these fees can skyrocket when scaled.
Every transaction requires a peer-to-peer verification. Depending on the number of blocks involved, it can become time-consuming. Currently, Bitcoin verifies or creates one block every ten minutes. Therefore, the more transactions standing in the queue, the more time it takes for their processing. Imagine having more people on the Blockchain, the transaction per second will definitely reduce.
Since scalability has been one of the major hurdles to the mainstream adoption of Blockchain technology. Blockchain enthusiasts have been working round the clock to develop solutions that will improve Blockchain scalability. Over the years, there have been several solutions that seek to improve the scalability of Blockchain technology.
Dubbed by many people as “the promised savior,” Ethereum has gone ahead to establish itself and the world’s first decentralized supercomputer. Eth2 is an upgrade to the Ethereum network, incorporating scalability and security it needs to serve us all. The first stage is phase 0 and is planned to launch this year (2020). Ethereum 2.0 will move away from Proof-of-Our Work which is a consensus mechanism it shares with Bitcoin.
The success of Ethereum 2.0 will outperform the current limit of 10-15 tps. Thus making it more efficient. It will also open up dApps to operate with reduced latency at fewer network fees. However, Ethereum has a scalability trilemma, as it must have a trade-off when choosing between scalability, security, and decentralization. In the Ethereum scalability trilemma, only two of the three can be satisfied.
However, Eth2 will try to make the network more scalable while improving its security and decentralization. Unlike the Proof-of-Our Work (PoW) that Ethereum 2.0 is moving away from, the Proof-of-Stake (PoS) requires that validators propose and vote on transactions. The only opportunity cost is staked collateral. By forgoing the energy-intensive mining process of PoW, PoS is more efficient.
At the moment, the Ethereum network is only able to process between 10-15 transactions every second. This poses a great problem when network traffic is high. The reason for the low throughput is every node must process every transaction. Although it shows that the network is very secure, it comes at the cost of speed. To improve scalability, Eth2 employs a process called Sharding.
This is the scaling solution that is being implemented to achieve long-term scalability. It is achieved by eliminating the need for every node to verify every transaction. The shard chains are involved in this process. You should see them as parallel Blockchains sitting comfortably within the Ethereum network and handling some of the network’s processing work. Shard chains have the capacity to transform Ethereum into a superhighway of interconnected Blockchain networks.
While the shard chains are processing transactions in parallel, the beacon chains ensure that they are all in sync. The beacon chain is a new Blockchain at the core of the Ethereum network. It provides consensus to all the shard chains. Validators will create blocks of transactions on every shard chain and report back to the beacon chain. They all work together to improve the scalability of Blockchain technology.
Polkadot is an experimental project initiative of the Web3 Foundation to build a decentralized web. The project tackles the challenges of centralized web. Hence, it is known as Web 3.0.
Polkadot offers transactional Blockchain scalability. It achieves this by spreading transactions across multiple parallel Blockchains. The multiple parachain architectures of Polkadot provides a horizontal scaling solution, allowing a high number of transactions to be processed in parallel.
At the heart of the Polkadot, architecture is the Relay Chain. The Relay chain which connects other chains (parachains) together. The chains are connected together by coordinating the cross-chain transactions and enabling the consensus mechanism across the platform. Polkadot also permits parachains to have state machines that are customizable for specific tasks, which promote efficiency in speed.
That way, the network achieves scalability in a decentralized manner.
Although most experts believe that Blockchain cannot attain decentralization, security, and scalability simultaneously. However, it is a hasty generalization because it will be a function of time for Blockchain. Concurrently, Ethereum, Polkadot, and the likes are currently working on Blockchain scalability.
Also read our latest article on Blockchain Architecture here.
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