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What is the blockchain trilemma?

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The blockchain trilemma, also known as the scalability trilemma, is a theorem outlining the fundamental problem of scaling up distributed systems. It is based on the idea that the three main characteristics of the blockchain (decentralization, security, performance) cannot be supported equally well at the same time. Decentralized networks can provide for only two of the three characteristics at a high level, which means that when one of them is improved, another element inevitably suffers.

We can explain this by looking at the example of Bitcoin. This blockchain has a fairly low number of transactions per second – around seven – and blocks are mined every ten minutes. As a result, when the network is overloaded, transactions with low fees can take a very long time to process. Put simply, security and decentralization are supported at a high level, but performance is not.

One way of improving performance is making the block size larger, but this will lead to a significant increase in the level of complexity. As a result, only large mining pools will remain in the network and the system will become more centralized. If you try to improve performance by reducing the mining time, security will suffer, as the nodes may not have time to reach a consensus before new blocks are mined.

The history of the blockchain trilemma

The American scientist and professor of computer science Eric Brewer formulated the CAP theorem back in the 1990s (it was formally proven in 2002). At its core is the idea that any distributed data store can provide for only two of three key characteristics: consistency, availability, and partition tolerance. This means that developers of decentralized systems have to sacrifice one of the three properties in order to support the other two at a high level of effectiveness.

This theorem was later adapted for the blockchain and popularized by Vitalik Buterin. His Ethereum project became the first platform to support the deployment of DApps. Given that decentralized applications could potentially see unlimited growth in the number of users, the main task for Ethereum developers was to increase network throughput without compromising decentralization or security.

How different networks experience the blockchain trilemma

It has been established that any distributed database has three main characteristics:

  • scalability (the ability of the blockchain to increase performance, which means processing more and more transactions per second);
  • security (resistance to hacker attacks);
  • decentralization (the absence of a central governing body, complete distribution of control over network functioning among participants).

Now let’s look at some examples to explain the impact of the blockchain dilemma on different decentralized networks.

  • Traditional blockchains (such as Bitcoin and Litecoin). Participants on these networks must confirm each transaction, which significantly boosts security and decentralization, but curbs productivity.
  • High-speed networks. These networks have a small number of nodes in operation, but each of them must comply with strict requirements. This approach provides the network with good performance and a high level of security, but significantly reduces decentralization.
  • Multichains. The principle of this approach involves connecting applications to various networks that interact with each other through cross-chain interoperability protocols (CCIPs). Blockchains of this type have a high level of decentralization and scalability, though security suffers. This is because all a hacker would need to do to in order to carry out a successful attack on the entire system would be to take control of the majority of nodes in just one network. This would threaten the structure of the ecosystem and lead to disastrous consequences for all participants.

Is there a solution to the blockchain trilemma?

Developers of decentralized ledgers have made many attempts to solve the blockchain trilemma over the years.

Today, there are two broad areas in which decentralized ledger developers are working on solutions to the blockchain trilemma: network layers 1 and 2.

  • Layer 2. Some blockchains seeking to solve the scalability problem opt to migrate part of their load to “layer 2”, which is in fact a separate blockchain. Some examples of layer 2 solutions on top of Ethereum are the Optimism, Arbitrum and Polygon networks.
  • Layer 1. Solutions involving layer 1 require changes to the architecture of the main blockchain. Developers of different networks offer different solutions: switching from PoW (proof-of-work), which is slow, to other consensus algorithms, sharding, increasing block size or reducing mining times, and more. It’s worth noting that designing and implementing these changes is much more difficult and takes longer than layer 2 solutions.

Some project creators claim that they have gone beyond “near-perfect compromises” and actually solved the trilemma. Last year, for example, the developers of Kaspa announced that, thanks to BlockDAG, the trilemma is no longer an issue on their network. Check out our article to find out more about what BlockDAG is and how Kaspa works.

More and more ideas are being put forward on potential improvements to the blockchain that boost one of the three core characteristics without compromising the other two. Whether the blockchain trilemma will ever be fully resolved, only time will tell.