Bybit Learn

Tech Deep Dive

Heard about the blockchain trilemma? Find out why developers are struggling to solve this issue of balancing scalability, decentralization and security.

The world around us is all about the trade-offs we make to achieve certain results. The blockchain trilemma is no different, so it’s crucial to understand whether the problems associated with blockchains can ever be solved. Developers are pouring time and energy into solving this problem, and we’ll look at how blockchain scalability, security and decentralization can work together. These three features are fundamental to how blockchains function, with a growing acknowledgment that you can only get two out of the three. That means every blockchain must sacrifice something to work as efficiently as possible.

The blockchain trilemma is the concept that decentralization, security and scalability can’t all be represented in one blockchain.

An Example of the Blockchain Trilemma: Bitcoin’s Scalability

The issue that Vitalik Buterin was talking about is whether or not it’s possible to achieve all three of these features in a single network. Many developers have concluded that achieving all three features is impossible, and that it comes down to making do with what 

 possible with the current technology — and figuring out how to make the trade-off in a real-world environment. As much as each project tries to optimize their network, there will be some shortcomings with each blockchain design. Thus, the key for developers is to figure out how much of each characteristic they’re willing to sacrifice in order to achieve optimal performance.

However, because of this, they control everything to get you transaction times that are shorter than a second. On top of that, the transaction fees are relatively low when compared to many other networks. Because of this, many people are moving toward a cashless society that will remove the need to carry physical money around.

As you can see, blockchain decentralization negatively impacts a network’s security and scalability. Blockchain decentralization is crucial — because it requires that you sacrifice one other feature to have the most optimal network possible. Ultimately, blockchain decentralization is better when one entity or individual doesn’t control the entire network. However, blockchain scalability or security are sacrificed when prioritizing blockchain decentralization.

Unfortunately, blockchain scalability is a significant problem that has kept many cryptocurrencies from being used on a mass scale. In order for a blockchain to be practical, it needs to progress to a stage where it's subjected to thousands of transaction requests and is able to process them rapidly.

Ideally, projects would want their blockchain to be able to scale to millions of 

 (TPS). This is one of the many reasons why Visa and MasterCard are used all over the world. After all, no one would use these cards if you needed to wait 20 minutes or more for your transaction to be processed — and no store would want to use this network if they had lengthy lines because it took so long to process transactions. Blockchain scalability needs to be built in because developers need to figure out how to make it work for specific use cases, rather than just looking at 

Blockchain security is the third feature many networks might choose to relax when it comes to the blockchain trilemma. Good blockchain security means that everything should be robust so that no one can take over the network — for example, capitalizing on network vulnerabilities to insert transactions into a network. 

The major downside to maintaining blockchain security is that it takes a lot of processor power to achieve it. This might be a problem if blockchain decentralization goes into effect as well. When you combine this necessity with the realities of blockchain decentralization and scalability, it means you have to expand processing power tremendously to achieve a small improvement in your TPS rating. These are the things that blockchain developers must balance out when trying to build a network. They have to figure out which one of the three they want to sacrifice.

With blockchain decentralization, another issue is consensus. What is the correct transaction for each ledger? When you’re writing a transaction into the blockchain ledger, how do you ensure that the transaction gets correctly updated to all of the nodes? This takes a lot of processing power — which is why it’s important to understand how to balance security with other features inside a blockchain network. Blockchain security is only going to become more important as its utility increases. An example of security gone wrong is with blockchains that use smart contracts.

The general idea with blockchain security is that it works in retrograde to blockchain scalability. Blockchain security requires that you use additional processing power to ensure that no one exploits the network. However, the major problem with this is that, as a consequence, there is now less power to process transactions. Developers have to decide between processing more transactions or maintaining enhanced security. On top of that, the more decentralized a network is, the longer it’s going to take to reach consensus — making it even more difficult to achieve ideal simultaneous blockchain decentralization and security. Many people are currently attempting to figure out how to make both of these concepts work correctly, without major downsides to the network.

An example of a secure network is Visa, mentioned above. It offers a credit card processing network that delivers millions of TPS. Despite this, blockchain security is never an issue with them. We almost never hear about anything being exploited. However, when something does happen, it’s usually because the vendor has done something prohibited. It’s never the credit card processing company itself with problem that’s been exploited. 

Most blockchains are quite secure, and security breaches aren’t an ongoing problem for most networks. However, as mentioned, security comes at the price of scalability. This has many people thinking of various ways they can improve security and transaction processing capability — without destroying the essence of the network.

Different Approaches to the Blockchain Trilemma

In addition, Avalanche’s minimal hardware requirements are impressive. One can start as a validator with inexpensive hardware for less than 1/10th the price of the hardware needed to become a validator on the Solana network.

It’s clear that being a validator is important for both blockchain decentralization and scalability. However, not many people are incentivized to become validators. Doing so is often too expensive or complicated to make it work, limiting its benefits to just a few

Potential Solutions to the Blockchain Trilemma

There are a few potential solutions to the blockchain trilemma, to be implemented independently. Many developers are also figuring out how to achieve the blockchain trilemma on each part of a network.

Polkadot’s Relay Chain allows multiple blockchain networks to connect to each other quite easily because they can connect to plenty of networks without the downsides inherent to the blockchain trilemma. Parachains run in parallel to the Polkadot blockchain. They use the Polkadot Relay Chain to achieve maximum scalability, security and governance.

Sharding splits up the blockchain and separates it across multiple validators. It’s a risky way of doing things because of the theoretical possibility that all validators holding a certain shard might go down. In this case, the entire piece of the blockchain would be lost. There are several algorithms to prevent this from occurring, which is one of many ways to improve the process Ethereum offers shard chains as a way of improving scalability. This method splits the entire blockchain horizontally, putting the load across multiple servers and making it possible for network participation and processing power to increase geometrically.

A nested blockchain exists within another blockchain. Layer 1 blockchains delegate processing to a nested blockchain, meaning that custom processing solutions can be created relatively easily. This is one of the best and easiest ways to solve the blockchain trilemma without too much difficulty. The biggest example of this is Ethereum Plasma, which uses a separate blockchain that’s anchored to the main chain, capable of offering proof of fraud to arbitrate disputes.

A state channel essentially has delegated transaction processing and capacity. Its nodes don’t require validation, meaning that it’s like an adjacent resource that does what it needs. The Layer 1 network only requires that the final state of the channel be recorded into the blockchain.

A sidechain is essentially a separate blockchain that connects to the main blockchain by using a two-way peg. It increases the existing blockchain’s interoperability and processing power. For example, Bitcoin’s network can use sidechains to process transactions even faster. This is one of the many ways people are getting more performance out of Bitcoin, even when technically it shouldn’t be possible.

There is no one solution when looking at how the blockchain trilemma can be solved. It’s theoretically impossible to achieve the Holy Grail. The best that we can do thus far is to optimize each blockchain as much as possible to achieve its stated goal. We might experience a future with virtually infinite computing power and geometrically faster network transfer speeds. In that environment, the blockchain trilemma could be solved relatively easily. It would stop being a problem because transaction speeds would be propelled “to the moon.”

The blockchain trilemma is currently a major problem for most developers. However, like anything else, once we understand the nature of the problem, we have a much better chance of finding a solution to it. Many developers are working on the complexities of the blockchain trilemma, and they’re quite optimistic — so we should be too.

The Blockchain Trilemma: Can It Ever Be Solved?

Get your daily dose of crypto and trading info