What is Blockchain Trilemma | The Ultimate Guide

Blockchains have a low throughput regarding the number of transactions they can process per second. For example, the Bitcoin network can handle around seven transactions every second. The more individuals utilize the blockchain network without slowing down or becoming too costly. Because of how many distributed systems are built, improvements to scalability often hurt decentralization or security. The blockchain trilemma describes this predicament.

What Is Blockchain Trilemma?

Vitalik Buterin first proposed the term “blockchain trilemma” to describe the dilemma that blockchain architects face when balancing the competing needs of decentralization, security, and scalability.

Most people believe that decentralized systems can only provide two advantages of security, decentralization and scalability at any one moment. The trilemma is in the process of being solved, however, by a variety of Layer-1 and Layer-2 solutions that have emerged as a result of the constant innovation throughout the decentralized ecosystem:

Vitalik Buterin, one of Ethereum’s co-founders, is credited with popularizing this phrase. Understanding the importance of blockchain decentralization, security, and scalability is crucial for the technology to reach its full potential. Blockchains face a trilemma when trying to maximize all three attributes: their usefulness, security, and utility. The strength of one tends to diminish as the strength of another decreases when one is strengthened.

Others who work in the field believe that simultaneously improving all three metrics is an impossibility that cannot be realized. Still, some forward-thinking programmers insist that blockchain systems can include all three or more. Algorand is a cryptocurrency proposal that claims to resolve the blockchain trilemma.

What Is Decentralization?

Blockchain networks, like Bitcoin, are decentralized intentionally. It’s set up such that no entity or individual is in command of anything. It’s more of a decentralized system. Anyone may join in on the action at the network layer. This means there is no one power source, but that authority rests with everyone. All users have access to the same data. Anyone trying to game the system by altering the records to their benefit will be met with outright opposition from other players.

To avoid getting too bogged down in the weeds, let’s use the BTC network as an illustration. Nobody else is calling the shots. Contrast this with the importance of banks in the economy. The banks guarantee the integrity of all documents and work to build customer confidence. However, the Bitcoin blockchain makes all that information available to all nodes in the network for verification before it is published to the digital ledger. The result is an autonomous system that doesn’t rely on external entities.

What Is Blockchain Security?

If a blockchain is not secure, its decentralized nature is irrelevant. Successful blockchain networks are those that can withstand assaults from malicious nodes. Security in centralized systems is because the network is closed. Those in charge can ensure the data is not tampered with. How, however, can this be accomplished in a decentralized system where anybody may participate?

It’s a lot to take in, but Bitcoin may illustrate how decentralized blockchain security works. Proof of Work is a cryptographic hash function and network consensus process used by the Bitcoin blockchain (PoW). Each block contains some electronic signatures used in cryptography (or hash). Since modifying one data block would result in a different hash for the whole block, the network is secure against tampering. If someone tried to tamper with the data, the remainder of the network would immediately notice.

What Is Scalability?

The term “scalability” refers to the effort to make a blockchain capable of processing an ever-increasing number of transactions in a given period. Blockchain technology needs scalability to benefit the greater good of society and potentially billions of users. On the other hand, this is an area where many blockchains are currently having trouble.

This is because security and decentralization are often considered to be the most important aspects of blockchain. Because of its importance to the blockchain’s ethos and purpose, decentralization may be found at the very core of most well-known blockchains. As we’ve shown, security is essential to the functioning of any blockchain.

However, scalability might be challenging to achieve when decentralization and security are prioritized. The capacity of a given chain to process transactions may be relatively low. A centralized payment system, Visa boasts that it can handle 24,000 transactions per second. It is because there is no need to worry about public nodes or reaching a consensus inside the network since it is a closed system. Think about how this differs from the most popular blockchains.

Why Does Blockchain Trilemma Exist?

Reducing the number of participants validating and adding data to the network in return for increased scalability and speed is the most apparent and straightforward solution to the issue described above. However, this would result in less decentralization and more power being held by fewer people. And since there would be fewer people participating, security would be weakened.

The underlying nature of how blockchain works make it difficult to scale, and here is where the trilemma sits, given the relationship between the desired attributes of decentralization and security. As you strengthen one, you must weaken another. 

Solving the Blockchain Trilemma

Emerging solutions may eventually resolve the Blockchain Trilemma, which offers substantial barriers to the widespread use of blockchain technology. Network safety, decentralization, and scalability are all factors that need to be considered. Although the CAP theorem has stood the test for almost four decades, the introduction of Layer-1 and Layer-2 solutions, as well as the emergence of PoS systems, is shifting the approach toward secure decentralized blockchain systems, distributed and scalable.

Conclusion

However, the scalability trilemma prevents blockchain from realizing its full transformative potential. It will be challenging to achieve widespread acceptance if blockchain systems can only process a modest number of transactions every second while still being decentralized and secure. Nonetheless, developers are working on solutions to this issue, so it’s possible that blockchain technology will continue to evolve, and these networks will be able to manage considerably more data in the future.