The blockchain trilemma, as coined by Vitalik Buterin himself, refers to this idea and it’s leading to some interesting ways that projects and networks are looking to solve the problem once and for all. But what exactly is the blockchain trilemma? The Blockchain Trilemma refers to a widely held belief that decentralized networks can only provide two of three benefits at any given time for decentralization, security, and scalability.
While blockchain technology is proving its remarkable utility in industries ranging from finance to art, the underlying structure of decentralized networks comes with unique challenges when compared to centralized networks. As early as the 1980s, computer scientists developed what’s called the CAP theorem to articulate perhaps the most major of these challenges
The perfect blockchain boasts three elements: Security, decentralization, and scalability. But finding a balance between the three is difficult and presents a problem referred to as the blockchain trilemma.
Scalability and decentralization are often held back by security, but security tends to be compromised by any shifts on a network that offer scalability.
Projects either choose to focus on two out of three or work on finding a solution to tackle the trilemma once and for all. Innovative ideas like sharding, side chains and state channels are used to address the trilemma but they’re still experimental.
A solution to the problem could lead to greater adoption of cryptocurrency and blockchain and widespread use of the technology across industries.
The Three Fighting Factors:
Do you know how you can’t balance a social life, work, and sleep easily? The blockchain trilemma is similar. It’s the belief held across the cryptocurrency community that truly decentralized networks need to choose between security and scalability. Let’s have a quick look at them before we dive in.
What Is Security On The Blockchain?
Blockchain is inherently secure but is not entirely immune to hacking. If a hacker can secure control of more than half of the network (51%), they can alter a blockchain and manipulate transactions to steal from the network. In a blockchain, the more nodes, the more security.
What Is Scalability?:
Scalability in the blockchain is the same as in business – it refers to how much a network can grow in the future while maintaining the same sort of transaction speed and output.
Scalability and decentralization tag-teaming up tends to compromise security, while security restricts changes that allow the decentralized network to scale. Why? Well, basically because decentralized networks take a bit of work to operate and it makes scaling a little difficult.
Decentralization And Security:
Decentralization is the backbone of blockchain and cryptocurrency. It means no central authority or entity is driving the project and eliminates the need for third parties to allow industries to operate. For example, in traditional finance, we’ve got banks. They’re centralized and act as a party that sits in the middle between you and your money. This is generally accepted because banks take responsibility to offer a way for us to store and send money safely – we expect money to go where we send it and in exchange for security we give some control of our money.
With blockchain, decentralized networks hand the keys to the individual, with direct access to their money.
What Is Decentralization?:
Decentralization talks about how control is shifted from one central entity, company, or government and is split across smaller groups to govern something. In the blockchain, decentralization gives power to people across the world to govern using their computers (nodes) rather than having central control of the network live with one person or party.
What Is Blockchain Security?:
To increase network throughput on a blockchain network, there’s an incentive to reduce the distribution of blockchain nodes either geographically, in number, or both. However, this pivot toward greater centralization reduces security on PoW networks. When consensus is achieved on an open network with limited nodal distribution, a 51% attack is more probable as hackers can amass the required hashing power with greater ease. By overwhelming a network, hackers can hijack the network and manipulate transactions for financial gain.
What Is Scalability?:
The scalability of a blockchain protocol refers to the blockchain’s ability to support high transactional throughput and future growth. This means that as use cases and adoption accelerate, the performance of the blockchain won’t suffer. Blockchains that perform poorly as adoption increases are said to lack scalability. The Blockchain Trilemma tells us that greater scalability is possible, but security, decentralization, or both, will suffer as a consequence. Scalability is the only way for blockchain networks to reasonably compete with legacy, centralized platforms whose network settlement times and usability are, at this point, far superior. While many blockchain platforms have established decentralization and security, achieving scalability remains the major challenge for today’s leading decentralized networks.
Although most people might not know about the blockchain trilemma, there is an awareness of the problems it presents (like Bitcoin’s slower transaction speed). If projects can successfully solve the trilemma, we could be looking at new levels of blockchain adoption.
If there’s a successful way to tick the “decentralized” box without worrying about security and the inconvenience of a lack of scalability, we are looking at a scalable blockchain future where individuals across multiple industries (from money to logistics, from legalities to property) can benefit. At the heart of it, blockchain offers a more fair, more balanced playing field for individuals to thrive rather than rely on a traditional, centralized and controlled system.