What is the blockchain trilemma? | CryptoNewsHerald cards

What is the blockchain trilemma?

The blockchain trilemma, or scalability trilemma, is a theorem that formulates the main problem of scaling any distributed network. It says that out of the three main characteristics – decentralization, security and performance – a blockchain can only have two.

How did the blockchain trilemma come about?

Back in the 90s, scientist Eric Brewer developed the so-called CAP theorem. According to her, a decentralized database (which includes the blockchain) can only have two of the three main properties – consistency (Consistency), availability (Availability) and resistance to division (Partition).

Thus, the theorem poses a problem: the creators of a decentralized database must sacrifice one of the three properties in order to achieve the proper level of the other two. This puts the long-term expansion of the database at risk.

Subsequently, this theory was adapted for the blockchain. Vitalik Buterin, the creator of Ethereum, became the popularizer of the “blockchain trilemma”. His project was the first full-fledged platform for creating decentralized applications. Since they assume unlimited growth in the number of users, the throughput of Ethereum should increase without losing other important characteristics of the blockchain.

After Ethereum, many other projects offered their solutions to the trilemma: EOS, Solana, Cosmos, Polkadot, Near, Avalanche, Terra, Everscale, Algorand and others. However, there is no generally accepted approach yet.

What is the blockchain trilemma?

Any blockchain has three main properties:

Scalability. The network is able to increase throughput, that is, to process an increasing number of transactions per unit of time.

Decentralization. The network operates without the need for verification by one or more trusted entities. Simply put, there should be no trust in a node or group of nodes that cannot be joined using a regular computer.

Safety. Blockchain is able to withstand a potential attack by a significant part of the nodes (ideally 50% of all nodes in the network, but anything above 25% is a good level).

There are three groups of examples that reflect this rule in different ways:

1. Traditional blockchains: Bitcoin, Ethereum or Litecoin. Each member runs a full node that confirms every transaction. Such networks have a high level of security and decentralization, but low bandwidth.
2. High-speed blockchains, including networks based on Delegated Proof-of-Stake algorithms. They have a small number of nodes (10-100). At the same time, high requirements are imposed on each of them – the need to have expensive server equipment or a large amount of native coins. These are productive and secure, but not sufficiently decentralized networks.
3. Multi-chain systems, in which applications are connected to different blockchains, and those, in turn, interact with each other through cross-chain communication protocols. This is an example of a decentralized and scalable network, but not secure. After all, to attack, you need to take possession of the majority of nodes in just one blockchain of the system in order to “break” the usual structure and cause negative consequences for all other participants.

How to solve the blockchain trilemma?

Today, there are two directions for solving the theorem, which would make it possible to avoid a forced compromise.

Second level solutions

These are kind of add-ons “on top” of decentralized networks that go beyond on-chain activity. One example is the Lightning Network, a Bitcoin micropayment network.

Classical transfers in the Bitcoin network can be expensive and slow, which makes transactions for a small amount of money uneconomical. For small P2P transfers and trade, they came up with the Lightning Network. This is a network where users can open channels. Transfers between these channels are cheap and happen in seconds. Verification of transfers occurs first at the application level, not the blockchain. The second-level solution is considered a kind of half-measure and does not achieve the goals of the blockchain.

First level solutions

These are solutions that are much more difficult to design and implement, but they have great potential and bring changes to the blockchain architecture itself.

Developers of various networks offer their own solutions to the “blockchain trilemma” – the use of several interoperable blockchains, sharding, new cryptographic methods, and so on. However, this does not mean that the proponents of the theorem are necessarily right and that the “blockchain trilemma” needs to be addressed at all. After all, this is an abstract design, not a physical law.