The goals and ambitions of blockchain efforts are generally known, yet what they prioritize and what they are recognized for might vary. Most initiatives focus on three major concepts: decentralization, scalability, and security.
Vitalik Buterin’s term “Blockchain Trilemma” refers to the problems that developers problems in creating a scalable, decentralized, and secure blockchain without compromising any component.
Blockchains are usually needed to make trade-offs to attain all three qualities:
Decentralized: This tries to build a blockchain system that is not controlled by a single entity.
Scalability refers to the ability of a blockchain system to handle a rising number of transactions.
Secure: The ability of the blockchain system to work as anticipated while also defending itself against attacks, faults, and other unforeseen issues is critical.
The Blockchain Trilemma's Fundamental Elements
Decentralization
Blockchain is based on the decentralization notion. Traditional finance has a totally centralized system. Customers give over total ownership of their assets, including personal documents, to banks.
Bitcoin and other early cryptocurrencies offered a decentralized network and transparent alternative to centralized banking, allowing money to be issued and stored without the need for a central authority.
Decentralized network
systems are essential because they enable anybody to use and develop on the platform without authorization. Consensus is used to make decisions, which means that rather than a single node, a group of nodes authorizes transactions.
These transactions cannot be modified once validated by a consensus method. As a result, the risk is spread among several businesses rather than concentrated in a single one.
Pure decentralization, on the other hand, has a cost and speed. Suppose numerous confirmations are necessary before achieving a consensus. In that case, the transaction will take longer than if the transaction can be confirmed by a single participant. Bitcoin is known for being fiercely decentralized and not reliant on a single entity.
Scalability
Scalability is the most challenging feature to implement in current blockchain networks. Even though several projects claim to have reached this phase, none can maintain a large user base. A transaction throughput (TPS) of 6,000 may be acceptable when a few hundred nodes confirm transactions for just 50,000 active users, but what happens when the same network must support millions of users at once?
It’s critical to understand that scalability isn’t a statistic that strives for an X TPS for a Y number of users. We don’t know what type of burden blockchains would have to bear if they become widely adopted.
As a result, there is no ultimate goal. It would be more reasonable to conceive of it as a degree or level of efficacy that should always be present.
Consider how many users blockchains such as Bitcoin should accommodate in this internet age! These figures change, and the systems must be able to handle the increased demand. According to reports, the Bitcoin blockchain will have 20 million monthly active users by December 2020.
With transaction fees of $25, we feel Bitcoin has hit its limit, particularly given its limited user base compared to Facebook and Twitter. As a reminder, during the previous bull run, Bitcoin’s network congestion peaked in 2017, charging users up to $60 per transaction.
Statista expects Facebook to have 2.8 billion monthly active users in Q4 2020. Twitter has just 330 million active users, according to data from the first quarter of this year.
As a result, scalability has become an urgent issue that must be solved as soon as feasible. Suppose Bitcoin tries to accomplish global acceptance objectives as it did in 2017. In that case, it will be met with harsh rejection, prompting many to doubt if blockchain technology is the way of the future.
Is it impossible to solve the Blockchain Trilemma?
Security
Let us now turn our attention to the most critical issue, security. Blockchains would be rendered worthless since anybody could disrupt and modify ledgers without them. This is not the case in most blockchain networks since nearly every developer incorporates concepts that prohibit 51% of attacks. The fact that decentralized technology is open source is the primary reason that blockchains are less secure than centralized databases. As a result, any hacker can read the code; he may spend countless hours figuring out what type of weakness he can exploit and much more. Exploits are exceedingly uncommon, especially on the Bitcoin network. Because smart contracts are used on other blockchains, they are more susceptible. Flash loans, a type of collateral-less loan popular in the DeFi business, may have been the quickest way to hack any project in 2021. In some sense, security and scalability are diametrically opposed. While scalability seeks to grow the system further, security aims to maintain the network stable and operational at all times.
To begin with, the Blockchain Trilemma is only a model for conceptualizing the multiple difficulties that blockchain technology confronts. No rule says the three aspects cannot be mixed. On the other hand, teams have tried a variety of approaches to optimize decentralization, scalability, and security.
The foundation upon which all other layers are built is security’s primary layer. Without it, decentralization may be tainted, and scalability may be short-lived. Security will lay the groundwork for both decentralization and scalability. Decentralization is a lengthy process, and scalability should be continually enhanced.