The Challenges Of Scaling Blockchain Technology

Wondering why scalability is an issue for blockchain? Here we’ve got you covered with various aspects related to blockchain scalability problem.

Blockchain was developed as a network that can enable interactions between participants without any central authority. All the participating nodes in the blockchain network have equal rights and it is reasonable to wonder how the network runs without any governing authority. Every individual node in the network has the capability to govern and manage transactions in the blockchain network.

On the other hand, the continuously growing number of nodes has resulted in the blockchain scalability problem. Even if blockchain has already been around for more than a decade, the problems with scalability can inhibit the prospects of blockchain adoption. The following discussion offers a detailed overview of the notable scalability challenges in blockchain with an outline of relevant solutions. In addition, you can also discover more about the future of scalability on the blockchain.

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Blockchain is Getting Bigger

The popularity of blockchain technologies has been growing substantially since the inception of this futuristic technological innovation. The massive research community and industry innovation have ensured promising levels of success for blockchain technology applications. However, blockchain technology was initially tailored for the financial sector. On the other hand, the immutable ledger and decentralization in blockchain have made it a suitable candidate for non-financial applications. For example, blockchain has found promising applications in the domain of the Internet of Things (IoT). In addition, the continuously increasing sizes of popular blockchain networks such as Ethereum also escalate the blockchain scalability challenge.

Despite the promising factors associated with blockchain, it is difficult to develop decentralized applications for various reasons. First of all, blockchain network is vulnerable to hacks. In addition, other issues such as the requirement of additional tools and restricted usability also affect the adoption of blockchain. However, scalability remains one of the top issues for blockchain networks now.

So, why is scalability an issue for blockchain? Take the example of Bitcoin for finding the ideal answer. It processes almost 7 transactions every second while Visa processes almost 1700 transactions every second on average. You can clearly see the difference in performance between Visa and blockchain-based technology. On the other hand, you also have to deal with the problem of deploying new technology. Therefore, the unresolved concerns of scalability on an architectural level create difficulties in the adoption of blockchain and its practical applications.

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Understanding Blockchain Scalability

When you are looking for scalability challenges in blockchain, you must have a clear understanding of blockchain scalability. The different factors which define blockchain scalability include cost and capacity, networking, and throughout.

  • Cost & Capacity

The cost and capacity factor in scalability implies the requirement of storing a large quantity of data on the blockchain. You have to store data starting from the genesis block to the most recent transactions. However, every node in the blockchain network does not have the adequate resources and capacity for storing such a massive amount of information.

  • Networking

In the case of every transaction on the blockchain, it is broadcasted across all nodes. Subsequently, a block is again transmitted to all nodes when it is mined. Therefore, the process can consume substantial network resources alongside increasing propagation delay. Therefore, it is important to have a reliably efficient mechanism for data transmission.

  • Throughput

Another important aspect in the context of the blockchain scalability problem refers to throughput. Blockchain throughput refers to the time required for confirming one transaction and the size of the block for the transaction. With more transactions, the size of blocks would increase thereby requiring additional resources.

Factors Affecting Scalability on Blockchain

So, what are the important factors which lead to the blockchain scalability challenge? The four important issues affecting scalability in blockchain include limitations, transaction fees, block size, and response time.

  • Limitations

The foremost issue in blockchain scalability refers to the limitations. In event of processing a new transaction, each node adds information regarding the transaction in the ledger. As a result, the increasing transaction history could topple the overall system. In addition, blockchain networks must maintain all data with accuracy to safeguard the levels of trust. Furthermore, blockchain also experiences issues of limitations in terms of hardware. Most of the issues in blockchain scalability problems arise due to hardware limitations. As the blockchain network expands further, it is difficult to set up and maintain the hardware required for operating nodes.

  • Transaction Fees

The next critical factor which leads to major scalability challenges in blockchain refers to the high transaction fees. The growing popularity of blockchain networks has led to more complexities in processes for validating transactions due to the demand for higher computation power for mining. Users have to pay a specific fee for the verification of their transactions. With the continuously expanding blockchain networks, users are eager to pay higher transaction fees for the verification of their transactions. However, it is also important to note that many other transactions remain in the queue without processing for a long time.

  • Block Size

Block size is also a notable aspect for understanding why is scalability an issue for blockchain. The increasing number of transactions in blockchain networks leads to a time-intensive process for executing transactions. For example, every block in the Bitcoin blockchain network had the size of 1 Mb in the initial days and they contained almost 2,020 transactions. On the other hand, the growing number of transactions in the network has led to increasing block size thereby affecting scalability.

  • Response Time

All transactions in the blockchain network should pass a validation process. Generally, transactions have to wait for long periods of time for validation, considering the number of transactions in the queue. For example, the Bitcoin network implies the need for almost 10 minutes for building a new block. The wait time for transaction validation increases during peak times. The response time is directly related to high transaction fees as one of the notable factors resulting in the blockchain scalability problem.

Therefore, the prominent factors which lead to the blockchain scalability challenge imply that the growing number of transactions and users is definitely problematic for blockchain networks. If networks cannot expand in terms of capacity for accommodating the new transactions and users, then they can risk a lot in terms of possibilities for widespread adoption. So, the search for blockchain scalability solutions has been increasing profoundly in recent times. Do we have any solutions yet?

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Possibilities for Blockchain Scalability

A detailed understanding of why is scalability an issue for blockchain brings the attention directly to potential solutions. Proof-of-Work-based permissionless blockchain networks are capable of offering a transaction throughput of almost 10 transactions every second. Furthermore, some technical modifications could help in improving the transaction throughput to almost 100 transactions every second. Most importantly, the technical modifications would not affect the security aspects of the open and decentralized blockchain networks.

On the other hand, permissioned blockchain networks could also serve as promising answers for the blockchain scalability problem. The consensus mechanisms in the permissioned blockchain networks could offer improved speed. At the same time, permissioned blockchain networks do not offer any clarity regarding decentralization with predetermined validators effectively controlling all transactions and applications. Is there any hope for blockchain scalability after all?

Blockchain Scaling Trilemma

Just when you thought that you have the solutions to blockchain scalability, another prominent concern pops up immediately. Before you discover plausible answers for issues in blockchain scalability, you need to understand the blockchain scalability trilemma. If you are improving scalability through permissioned network, you are compromising on decentralization. The scaling trilemma is a loose concept which implies that blockchain networks could have only two out of the three crucial traits of decentralization, security, and scalability. Let us understand the connection between the three distinct components in this trilemma to find better solutions for the blockchain scalability challenge.

The blockchain network must reach an agreement regarding the validity of the transaction for its settlement. In the case of a system with a large number of participants, the network may require more time for reaching an agreement. Therefore, it is clearly evident that scalability reduces with the rise in decentralization. Think of two different Proof-of-Work-based blockchain networks with similar levels of decentralization and assume security as the hash rate in the blockchain. In event of a higher hash rate, you will have a lower confirmation time alongside prominent growth in scalability in with security.

So, with decentralization being constant, you can have a directly proportional relation between security and scalability. Therefore, the blockchain scalability trilemma basically implies that a blockchain network could not optimize decentralization, scalability, and security simultaneously. As a result, you can look at the need for making trade-offs.

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Promising Solutions for Blockchain Scalability

The different challenges for blockchain scalability alongside the scaling trilemma present many critical setbacks for blockchain adoption. However, it is possible to address the various scalability challenges in blockchain with the following solutions.

  • Better Consensus Mechanisms

One of the most commonly recommended solutions for the blockchain scalability challenge refers to improving consensus protocols. Renowned blockchain networks such as Bitcoin presently use the Proof of Work consensus protocol. Even if the Proof of Work consensus mechanism offers reliable security, it is considerably slow. Therefore, many blockchain networks are looking towards the Proof-of-Stake consensus mechanism as a promising solution for blockchain scalability issues. The PoS consensus mechanism does not require miners to solve cryptographic algorithms by using massive computational power. On the contrary, it ensures consensus through the selection of validators according to stakes in the network. The adoption of PoS consensus could substantially boost the capacity of Ethereum networks alongside improving security and decentralization.

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  • Sharding

Sharding is one of the conventional choices for addressing the blockchain scalability problem as an on-chain scaling solution. Based on distributed databases, sharding is presently one of the notable layer-1 scaling solutions for blockchain networks. Sharding involves breaking down transactions into smaller data sets which are referred to as ‘shards’. The network then processes the shards simultaneously in parallel, thereby enabling sequential work on multiple transactions. With the help of sharding, the information could be divided among different nodes while ensuring consistency of information. Shards serve as proof for the mainchain while ensuring interaction with each other for sharing addresses, general state, and balances by leveraging cross-shard communication protocols.

  • Nested Blockchain

Another promising answer for resolving scalability challenges in blockchain would refer to the nested blockchain. It is basically a decentralized network infrastructure leveraging the main blockchain for establishing parameters for the larger blockchain network. In addition, it also ensures the execution of transactions over an interconnected network of secondary chains. Nested blockchain is one of the promising entries among layer-2 solutions aimed at resolving the blockchain scalability problem.

While it is good to hear about promising solutions for blockchain scalability, the solutions are still in the experimental stages. It is quite clear that scalability is a profound limitation for blockchain networks. Developers are trying to resolve the problem of scalability through different perspectives. For example, increasing block size could increase scalability. However, such principles have not found mainstream popularity. At the same time, the addition of another layer over the existing blockchain network with layer 2 solutions is also a promising solution for scalability. On the other hand, it is too soon to round up conclusions regarding the most feasible solutions for scalability.

Bottom Line

The future of blockchain seems to be quite bright with the feasibility of its applications in diverse sectors. However, the increasing number of users would obviously imply the need for larger blockchain networks. An in-depth understanding of the blockchain scalability challenge shows how scalability is represented in cost & capacity, networking, and throughput.

In addition, you can also identify the different factors responsible for blockchain scalability issues. Blockchain network and hardware limitations, increasing transaction fees, and block size alongside transaction completion times are affecting scalability. Furthermore, blockchain scalability has to deal with the concerns of scaling trilemma. However, the availability of certain solutions for resolving the issues in blockchain scalability presents promising prospects. In the long run, solutions for blockchain scalability would have to develop with an emphasis on resolving all scalability issues comprehensively. Learn more about blockchain scalability right now!