There is no doubt that we need scalable blockchain solutions. Bitcoin processes 7 transactions per second and Ethereum processes 25 transactions per second. Visa does around 1,700 transactions per second in comparison and often we talk about Visa level scalability in the blockchain. Numerous organizations are working on blockchain technology and mass adoption is happening slowly but without proper scalability, adoption will never reach the desired peak. Deploying new technology is a cumbersome process and the unsolved scalability of blockchain technology is creating a bottleneck for practical usage.
Blockchain is basically a decentralized ledger and the openness of the technology really creates a plethora of possibilities. No technology becomes ready for mass usage overnight. The field of blockchain is quite happening and developments are taking place quite rapidly. Many projects came up with solutions that enabled distributed ledgers to handle high TPS. Ethereum co-founder Vitalik Buterin introduced a concept called ‘scalability trilemma’. A blockchain must be scalable but to make a blockchain scalable, we can’t compromise with the nature of decentralization and security. The trilemma depicts that it is impossible to achieve perfection for a blockchain in these three parameters altogether– scalability, decentralization and security. A blockchain needs to be resistant to censorship and it needs to be permissionless too. Immutability is also a key feature of blockchain. It needs to resist attacks like 51%. All these are very basic criteria to operate a transparent, safe and robust blockchain. Scalability comes only after fulfilling all the cited features. Quite tough! That’s why layer 2 solutions are being created. These layer 2 solutions work on the top of the base layer and generally they settle transactions in batches and thus take transactions off-chain. For example - Loopring’s ZK-Rollup has a maximum throughput of 2K TPS on ETH 1.0. On proposed ETH 2.0, the max throughput is going to be 20K+ TPS. Bitcoin’s Lightning Network is a layer 2 scaling solution of Bitcoin and it offers up to 10K TPS in a demo run. Layer 2 scaling solutions are definitely needed but while we appreciate these projects, we can’t deny the base layer scalability issue as the world has already seen the problems arising out of the low scalability of several blockchains.
Image Source – Blockchain scalability trilemma
Vitalik recently said in this post, “Sharding is the future of Ethereum scalability, and it will be key to helping the ecosystem support many thousands of transactions per second and allowing large portions of the world to regularly use the platform at an affordable cost.” Sharding aims to solve blockchain scalability trilemma. Let’s make things simple! Sharding is a database partitioning concept which creates more efficient databases. A network can be divided into smaller partitions which are known as ‘shards’. Each shard carries distinctive and independent data in comparison to other shards. It is basically horizontal or vertical partitioning of a database and separates load on a single database. The split nature of sharding enables a blockchain to process the transactions very fast as it divides the workload and also reduces latency. Ethereum 2.0 will have sharding and it will happen through random sampling. Vitalik explained that: “In the case of Ethereum sharding, the near-term plan is to make sharded blocks data-only; that is, the shards are purely a ‘data availability engine’, and it's the job of layer-2 rollups to use that secure data space, plus either fraud proofs or ZK-SNARKs, to implement high-throughput secure transaction processing capabilities. However, it's completely possible to create such a built-in system to add ‘native’ high-throughput execution.”
Sharding is a complex process. Improper implementation of sharding will expose the blockchain to attacks but every technology carries some risks. We can’t stop innovating to avoid hazards. A sharded blockchain can definitely provide a better response time and process the transactions very fast. Building a Layer 2 infrastructure on a sharded blockchain will increase the speed of the transactions manifold and provide extreme scalability. What about the high TPS censored blockchains? Building DeFi applications on a censored high TPS system is definitely a mockery of decentralization. There is no doubt that the centralized high-speed blockchains can do well in the short term but they won’t sustain in the long run as people will prefer decentralization down the line. A centralized high TPS system is also vulnerable to external factors as the block producing nodes are easily detectable and censorable. And who will build a decentralized Layer 2 infrastructure on the top of a centralized chain? Wide adoption of sharding technology in blockchain may not happen very quickly but the developers have started to work. Let’s see how things turn up.
Note: This post was first published here for Cryptowriter in association with voice.com.