What is the Blockchain Trilemma and how to solve it?

[TL;DR]

The Blockchain Trilemma is described as the challenge that prevents blockchain projects from attaining decentralization, scalability, and security altogether.
Blockchain development is challenged to create a blockchain that can scale while remaining decentralized and secure.
There have been numerous innovations to enhance the performance of blockchains, but a close look gives that they all water down decentralization or security for the sake of scalability.
New technologies currently used to remedy this trilemma include sharding, rollups, side chains, and Layer-2s.

Keywords: Blockchain trilemma, Blockchain, decentralization, cryptocurrency, sharding, security.



Introduction

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Blockchain, one of the most exciting industries in the world driving the growth of tech iteration, aims to provide a secure, trustless currency protocol that works without a centralized body. However, decentralization, scalability, and security are considered the most fundamental features of blockchain networks.
Decentralization refers to a blockchain network not controlled by a central entity; anyone can validate blocks from anywhere in the world.
Scalability refers to how well a system can manage increasing amounts of data and transaction processes.
Security means a blockchain must be safe for its users and protected from various attacks to keep the network running 24/7.

Developers and creators in the crypto world have been working tirelessly to overcome daunting challenges during the development of the industry, especially ones facing the core concepts of the blockchain network. One of the most common setbacks is the blockchain trilemma.



What is the Blockchain Trilemma?

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The Blockchain Trilemma refers to the challenge blockchain projects face while attaining decentralization, scalability, and security altogether. Each project aims to achieve some level of all three, but with the Blockchain trilemma, only two of the three can be sufficiently achieved at any time. The trilemma describes the problem that as a blockchain promotes one feature, it compromises that of the others.

From the start, blockchain development has been challenged to build a network that can scale while remaining decentralized and secure. But, due to the Blockchain trilemma, this is seen as almost an impossible task.

The term blockchain trilemma was coined in 2014 by Vitalik Buterin, co-founder of Ethereum. He proposed this term because of his experience working on Ethereum and blogging about blockchain architecture.


What is the impact of the Blockchain Trilemma?

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It is very challenging to maximize decentralization, scalability, and security simultaneously. For instance, the popular proof-of-work (PoW) system, Bitcoin, is decentralized and highly secure, but it cannot scale and is too slow to be widely adopted. On the other hand, Proof of stake (PoS) systems can scale better than Bitcoin, but most scalable projects are often purely centralized hence, are not inherently secure.

Blockchain networks either maintain decentralization and security, giving up scalability or choose scalability and security without decentralization.

Moreover, the blockchain trilemma wasn't an issue back when crypto was a niche industry used by a small group of enthusiasts. Now that traditional finance and other mainstream industries look to blockchains as a transparent, reliable environment for exchange and collaboration, these downsides are increasingly an obstacle.

The Blockchain Trilemma also affects the value of a coin. Far beyond market speculation, a cryptocurrency's utility depends on its capacity to provide decentralization, scalability, and security.




Solving the Blockchain Trilemma

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Layer 0 Solutions
The foundational aspects of Layer 0 cannot be overemphasized. However, nothing can be done effectively if this layer is poorly built.
- Relay Chains
Relay Chain makes it easy for multiple blockchain networks to connect without the network experiencing downsides inherent to the blockchain trilemma. The Polkadot is one Blockchain that employs this technique, Polkadot Relay Chain, to achieve maximum scalability, security, and governance.

Layer 1 Solutions
Layer 1 provides the foundation needed to ensure the network works at its proper capacity. Networks that don't have a solid Layer 1 invariably have problems down the road.
- Proof of Stake
Achieving a solution to the Blockchain trilemma may not be possible with Proof of Work (PoW) consensus. PoW networks should switch to a PoS system which fosters scalability in the network. The Ethereum community chose to change the entire consensus from PoW to Proof-of-Stake (PoS) to solve the blockchain trilemma.
- Sharding
A unique method that batches transactions together into sizable units is known as "shards." This technique horizontally splits the entire Blockchain, distributing the load across multiple servers and enabling a geometric increase in network participation and processing power. Sharding enables validators to process the data faster, creating new space for more transactions and thus improving scalability.

Layer 2 Solutions
Layer 2 are solutions built on the main Blockchain and handle most of the transactions. A side blockchain can be linked to the mainnet but have an entirely different consensus that allows it to scale. This will reduce network congestion and improve the throughput rate.
- Nested Blockchains
This is one of the most effective and straightforward methods for solving the blockchain trilemma. Networks delegate processing to a nested blockchain, and specialized processing solutions are created easily on the Blockchain. This technique is capable of providing proof of fraud to resolve disputes.
- Side Chains
A side chain is a technology that involves multiple chains running in parallel to increase Blockchain's interoperability and processing power. The idea is to release the weight off the mainnet by dividing transactions among numerous chains. The Bitcoin network employs the side chains technique to speed the transaction process.
- Rollups
Similar to the sharding method, rollups batch transactions into sizable chunks but off-chain. Rollups execute transactions outside the Layer 1 blockchain and upload them after consensus is obtained. The technology is less complex and provides faster finality for users.
- State Channels
State channels are two-way interaction mechanisms between a blockchain and off-chain transactions. They feature a smart contract model that reports the final "state," thus miners are not needed to confirm a transaction.


Bottom Line

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The blockchain trilemma, which deals with decentralization, scalability, and security, is one of the setbacks that must be overcome for blockchain technology to gain mainstream adoption. The Blockchain of today is capable of handling a large user base, but they still battle with security problems and intense debates concerning decentralization.

However, considering the industry is still in its infancy, significant strides have also been made to curb emerging challenges like the blockchain trilemma to its barest minimum.




Author: M. Olatunji, Gate.io Researcher
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