Crypto Academy / Season 5 / Week 2 / [Beginner Course] - Blockchain Trilemma

The term blockchain trilemma itself is formed by the combination of two separate worlds which are blockchain and trilemma. Since we all are familiar with blockchain already so before explaining the whole term I’ll be shading light on what trilemma alone is.

Trilemma

A trilemma is a condition where only two among three things are possible to attain. Now,

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Blockchain Trilemma

The blockchain trilemma is the type of rule or fact or belief that a blockchain among three fundamental features of blockchain which are decentralization, scalability, and security can only acquire two of these features while it has to compromise among one of them.

Before going further I’d explain these three fundamental features shortly since we’ll be covering them in the third question of this homework task.

Scalability

Scalability can be defined as the ability of blockchain to generate output greater than input or simply the ability of blockchain to process its transaction.

Security

The security of the blockchain deals with the protection of blockchain from unwanted invaders i.e. hackers attacking the system.

Decentralization

This feature makes a blockchain a platform where there’s no governing centralized body controlling the operations being carried out on blockchains.

The above-mentioned feature is what gives a boost to blockchain however as discussed it is believed that all these three features cannot be attained by a single blockchain i.e. it has to choose any two among three giving it a shape of the trilemma. If we look at popular blockchains such as Ethereum and Bitcoin we’ll get to know both of these have prioritized security and decentralization over scalability whereas we have some blockchains that compromised on decentralization rather than scalability and security although they are not entirely decentralized there’s compromised decentralization. However, some solutions are being made to check out if there’s any way for blockchain to acquire all three of these features at once we’ll be talking about that in the second part of this homework post.

1. Is the Blockchain Trilemma really a Trilemma?

If you’re taking blockchain trilemma being trilemma as part of the law or something scripture on stones that cannot be changed then NO blockchain trilemma is not some stoned law that cannot be changed or has been confirmed by many crypto experts.

We know blockchain technology is still being developed and growing every day one cannot say blockchain trilemma is some eternal unsolvable issue as who would have thought we’d be having technology like today back in stone stage.

The thing is man evolve with time and technology evolves even quicker with a man so I think we’d be having blockchain having all three features in them in the future by some means although It seems impossible to have high scalability blockchain facilitating decentralization and no blockchain has yet been able to solve this issue yet.

So coming back to blockchain trilemma being a real trilemma on not if we’re talking on the present structure of blockchain development so it’s structurally a trilemma “yet” but I strongly believe the future will unfold the solution for this trilemma seeing the growth of technology.

1. Define the following concepts in your own words

A. Decentralization

B. scalability

C. Blockchain Security

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DECENTRALIZATION

Decentralization is what lays the foundation of blockchain technology and gave it hype in the finance market.

This concept eliminates the role of any third party or intermediary which carries out the transaction for users and distributes the role of decision-making authority from one individual or body among different members of the network.

This has brought a revolutionary revival in the finance system of current times as it has eradicated the need for centralized system governing which is done by blockchain allowing data to pass to multiple nodes that operate the blockchain hence when transaction made it has to be verified by all these nodes which have been time taking process that’s where scalability is compromised hence the relation between scalability and decentralization is said to be inversely proportional because we know if we have centralized body verifying transactions for us then it can though we’ll get scalability of high level but decentralization will be eliminated or compromised partially.

Decentralization lets anyone using blockchain build on or be a part of the governance of the system. The transactions are verified by each individual following a mechanism and the authority is divided among distributed users and eliminates the chances of attack of unwanted invaders.

SCALABILITY

Scalability is another significant feature of blockchain that is the ability of blockchain to carry out its transaction or simply can be defined as the speed of transaction of blockchain. The scalability speaks on how scalable the blockchain is the more it’s scalable the more transactions it can verify in a unit of time or vice versa.

The scalability again depends on the consensus mechanism as I mentioned above. For example, bitcoin uses a Proof of Work consensus algorithm where it takes 10 minutes to verify a transaction whereas blockchains like Solana using Proof of history can confirm 50k transactions in seconds as it’s among one of the most scalable blockchains we have.

In easy words, the scalability deals with the traffic on blockchain the more efficiently and quickly it deals with the crowd the greater scalability blockchain possesses. Till now we see scalability in blockchains by comprising decentralization such as blockchain using POW prioritize decentralization whereas PoS is more scalable and less decentralized.

BLOCKCHAIN SECURITY

Security of blockchain is among the essential most components which I haven’t seen any blockchain compromising on. Security speaks volumes on the authenticity and reliability of blockchain i.e. how there’s no one scamming through blockchain or no invaders can access the blockchain. Blockchain security can simply be understood by knowing that it strengthens the blockchain against unwanted attacks of hackers.

We have come across multiple hacking attacks in past on some real popular blockchains some of these shutdowns whereas some proved themselves to be capable back again such as Binance, KuCoin, etc. The security again is linked with the consensus algorithm of blockchain along with the source code of it.

The blockchains are tested before they are launched and if in the testing process they turn out to be prone to hacking the developers can work on enhancing the security however some of them launched and popular blockchains have been hacked hence one cannot be entirely sure on the security of blockchain because with growing technology the dark side of the internet is also grooming their self.

1. Based on your knowledge, explain at least two viable solutions to the challenges posed in the Blockchain Trilemma.

LAYER ONE SOLUTION

Consensus Algorithm

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Before coming to a solution for the blockchain trilemma first let’s know what layer 1 is. Layer one is the main blockchain which we commonly use the layer two is when there’s a third party involved along with layer one however we’ll be talking about layer two down below let’s first talk about layer one solution.

As we know the layer one is the main blockchain such as bitcoin, ethereum which we usually use however to solve blockchain trilemma by making changes in the consensus algorithm. Let us understand through an example:

We know bitcoin is built on using pow consensus algorithm which is the first-ever consensus algorithm however it is not efficient with scaling so now the blockchain uses another mechanism proof of stake which not only preserves the features of bitcoin blockchain but even help solve scalability issues. This very solution is being used by ethereum which is shifting its consensus algorithm from POW to PoS commonly known as Ethereum 2.0.

LAYER 2 SOLUTIONS

Sidechains

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Layer two solutions try to solve blockchain trilemma through off-chain methods i.e. another chain built on the main chain is used for solving scalability issues. This is done by launching sidechains that are linked to the main blockchain and used to carry out massive transactions and the transaction record is generated on the main blockchain. These sidechains can be built on different consensus algorithms than the main chain that provides better transaction speed or scalability. The transactions records are made public keeping it transparent and taking the load of the main blockchain. Furthermore, in case of breakdown of the system, the refund can be done through the main chain as it’s more secure than the sidechain which solely focuses on transaction speed.

Conclusion

As I said above the blockchain is a revolution made in the financial system of the current world and has been growing every day. The core features of blockchain are scalability, security, and decentralization however to date no blockchain has been able to inherit all three of these features at once i.e. one of these features is always compromised. Some blockchain compromise on decentralization whereas other on scalability so far as I have studied security is never compromised on blockchain and that’s how it should have been. The property of being able to inherit two among three gives this a shape of trilemma or precisely blockchain trilemma but as I discussed above it ain’t any stoned trilemma as I firmly believe on this thing being solved in future and many developers are working on it so I believe we’d be getting a blockchain inhering all three of these features in future.

Lastly, thanks to the professor for the amazing yet east lecture hope I met your expectations for this task if not I ought to do better next time