Blockchain Scalability Solutions: The Kryptonite of Decentralization

As cryptocurrency continues to gain wider adoption among mainstream society (particularly in Europe), one of the issues still holding it back is an old foe

As cryptocurrency continues to gain wider adoption among mainstream society (particularly in Europe), one of the issues still holding it back is an old foe. Namely, the scalability of the underlying blockchain technology.

This article will explain what blockchain scalability solutions are, how they work, and the different types available. We will also explore the concept of transaction throughput and its impact on blockchain usability.

Finally, we will delve into the blockchain scaling debate and the trade-offs involved in achieving optimal scalability.

What are Blockchain Scalability Solutions?As cryptocurrency continues to gain wider adoption among mainstream society (particularly in Europe), one of the issues still holding it back is an old foe. Namely, the scalability of the underlying blockchain technology.

Scalability solutions are all the different ways to boost a blockchain network’s performance and throughput. The goal? Process more transactions per second, cut lengthy confirmation times, and reduce fees.

How to Scale Blockchain NetworksThere are a few main approaches the industry is exploring to address blockchain scalability. Let’s break them down:

Layer 1 (On-Chain) SolutionsThis involves upgrading the core blockchain protocol itself. Common Layer 1 tactics include:

SegWit

SegWit, or Segregated Witness, is a protocol upgrade to Bitcoin that restructures how transaction data is stored and helps to resolve issues around transaction malleability. Essentially, it increases block capacity to accommodate more transactions in each block.

Sharding

Sharding breaks up a blockchain network into smaller “shards.” Each shard handles its own transactions and smart contracts, processing that workload independently.

Hard Forks

A hard fork is a major change to the blockchain’s protocol that creates a new version that is incompatible with the old one. It requires all nodes to upgrade their software to continue operating on the network.

Layer 2 (Off-Chain) SolutionsLayer 2 solutions build an additional layer on top of the main blockchain to process transactions off the main chain. This boosts scalability while still securing transactions with the base layer. We’ll go into more detail on these in a moment.

Transaction Throughput Issues ExplainedTransaction throughput is the number of transactions a blockchain can handle per second or other period.

Different consensus mechanisms have a big impact on throughput as well as the fees required to process those transactions.

Bitcoin is an example of this issue. Its main chain can only handle around seven transactions per second. Ethereum is only slightly better, at 12-15 TPS (transactions per second).

Compare that to the transaction processing giants of traditional finance, and you will find a stark contrast, an example, and a weakness in DeFi applications when compared to TradFi. For example, Visa averages 1,700 TPS but claims to be able to handle 65,000 TPS. Other major payment networks, like Mastercard, hit similar throughputs. Achieving such throughputs will require significant blockchain scalability solutions, none of which exist or are used on a large scale today.

This lack of throughput on blockchains leads to network congestion, long delays in confirming transactions, and high fees. No wonder addressing this transaction bottleneck is a huge priority – it’s crippling blockchain’s usability for many real-world, high-volume use cases.

Layer 2 Blockchain Scalability SolutionsOf all the potential scaling solutions, Layer 2 (L2) approaches attract much attention and optimism. The general idea is to build an extra layer on the main blockchain to offload some transaction processing.

While processing transactions separately, Layer 2 blockchains still derive their security from the base Layer 1 (L1) chain. L1s include the likes of Bitcoin and Ethereum, and some notable L2s are Polygon (MATIC) and Arbitrum (ARB).

To understand L2s and their relationship with L1s, imagine a busy highway connecting cities as the main L1 blockchain. As more users join, it gets congested and bogged down. A Layer 2 is like building an elevated expressway above the highway. It acts as a parallel lane to handle more transactions and data transfers while still relying on the security of the main highway below.

Bagaimanakah Lapisan 2 meningkatkan skalabiliti blockchain Lapisan 1? Mereka direka untuk mengambil alih beberapa beban berat dari rantai utama. Urus niaga berlaku di luar rantaian pada Lapisan 2, dengan hanya keputusan akhir direkodkan pada Lapisan 1.

Ini mengurangkan beban dan bayaran pada lapisan asas, meningkatkan daya pemprosesan dan kelajuannya.

Rangkaian Lightning untuk Bitcoin ialah salah satu yang terbesar Projek lapisan 2. Ia membolehkan pengguna membuka "saluran pembayaran" antara satu sama lain untuk transaksi murah yang hampir serta-merta di luar rantaian utama. Baki akhir direkodkan pada blockchain Bitcoin, tetapi pemindahan individu berlaku di luar rantaian. Bilangan urus niaga luar rantaian hanya dihadkan oleh kapasiti Lapisan 2, bukan rangkaian utama.

Penyelesaian seperti rollup dan saluran keadaan memanfaatkan sifat keselamatan Lapisan 1 sambil beroperasi sebagai lapisan pelaksanaan berskala sendiri.

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