Understanding the Scalability Trilemma

Since its inception, blockchain technology has been a fascinating topic. Thanks to the way blockchain technology works, we can find adequate use scenarios for it in almost every area of finance, art, healthcare, and more. Now that you’ve understood that this technology is remarkably useful, it’s important to understand its three main pillars–decentralization, security, and scalability.

Decentralization is probably the most important pillar of blockchain technology, as the entire concept is based on not having a central authority to oversee anything. Security should not be taken lightly either, as no one wants to use a network that has questionable safety. Lastly, we have scalability, which refers to the blockchain’s potential for future growth and the way it currently handles transactions. Bigger scalability means more features, faster transactions, and lower costs.

With these three features ahead of us, let’s talk about what this trilemma is all about.

What Is the Scalability Trilemma?

The blockchain scalability trilemma is relatively simple to understand; when a network’s pillar is improved, the other two pillars suffer. So, the trilemma can be summarized like this:

A blockchain network (let’s take Bitcoin as an example) must choose to sacrifice either security, decentralization, or scalability.

If a network’s scalability gets improved, it becomes less secure and less decentralized. Of course, it will be much easier to deploy apps and add new features on a scalable network, but it will be much more prone to attacks.

On the other hand, if security receives the best treatment, the network will be significantly less scalable and have a lower level of decentralization (since its transactions and operations will be more tightly controlled). This is also a problem when it comes to blockchain immutability, which is a core concept of blockchain.

Lastly, blockchains that have a higher level of decentralization are significantly less secure and are much more prone to hacks and attacks. This is against the principle of blockchain transparency.

Why Scalability Is Important for Blockchain

As one of the three main pillars of blockchain technology, scalability is much more than the pure transactional output and the ability to add new features. Scalability also refers to a network’s ability to provide a solid experience for its users; faster transactions, smaller fees, better features, etc. An example of this is the development of a smart contracts blockchain, which is a section that Ethereum has pioneered.

While decentralization is the main pillar that blockchain was built on, security is important to ensure that every user is safe in the network, and scalability by itself ensures that the network will provide a good experience for its users. As many blockchain experts have said in the past, scalability is absolutely essential for mass adoption.

Advantages of Scalability

Scalability Leads to Significantly Better and More Features

In the original model of the blockchain network, the blockchain was just a chain of different blocks (hence the name) that runs on different nodes with no central figure over them. It was a simple concept, but now, in 2022, scalability allowed us to add our own applications on the same blockchain (called dApps), or even place an entirely new blockchain on the current blockchain (which is how most altcoins are made).

Scalability Leads to an Overall Faster Network

Networks that are more scalable make processes on the blockchain run significantly faster. A process on the blockchain often refers to how quickly a new block is processed and generated. For example, a less scalable network like Bitcoin has an average transaction speed of 30-120 minutes, while Tether’s TRC20 network performs a single transaction usually in less than 2 minutes.

Scalability Leads to Smaller Gas Fees

The original concept of blockchain is the following: for a transaction to be processed on the blockchain, a block must be “mined” (i.e. generated) for it. This block is usually generated by “miners” who have to waste a lot of time and electricity to create the block. A highly scalable network like Tether processes a new transaction for about $1,20, while the average ERC20 gas fee (Ethereum’s main network) is $10–$15.

Disadvantages of Scalability

Improving Scalability Is Time-Consuming for Developers

For a network to become more scalable, the team behind it must continuously work on it. This means manually adding new features, improving the old ones by increasing efficiency, and changing some of the algorithms.

Making a Network More Scalable Increases the Room for Errors

As mentioned above, for a network to become more scalable, the team behind it must be ready to invest hours of work into improving it. This could lead to minor errors in the nodes connected by the chains, which could lead to bigger downtimes, slower transactions, and vulnerability to attacks.

Potential Solutions

Thankfully, the scalability trilemma can be solved with the help of a couple of different approaches. We’ll describe the most convenient ones below:

Sharding

Sharding is one of the most popular methods used for scaling networks like Litecoin and the Ethereum blockchain, which is primarily based on dividing transactions and blocks into small data “shards”. These transactions and information blocks are then also evenly distributed among blocks, efficiently transferring addresses, balances, and amounts among the network.

Sidechains

A sidechain is an incredibly simple concept that has drastically improved the performance and Bitcoin scalability of PoW networks like BTC and ETH. In simple terms, a sidechain is another transactional chain that runs on the side of the main blockchain and is used to ease its load. Sidechains, however, have proven to be slightly underwhelming when it comes to security, as the transactions and blocks processed on them are not private, and are not as secure as the ones on the blockchain.

Nested Blockchains

A nested blockchain is the opposite concept of the sidechain. If the sidechain is a chain that runs alongside the blockchain and is only used when the blockchain is overwhelmed, a nested blockchain performs the tasks and then delegates them to the main blockchain. This approach has had success in the OMG Plasma project and can be used in other PoW networks like Ethereum and Bitcoin as well.