The 'Blockchain Trilemma' That's Slowing Down Crypto | Crypto

The ‘Blockchain Trilemma’ That’s Slowing Down Crypto

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– Public blockchains are crypto’s engine room. These digital ledgers record account balances, contract codes and other data using complex digital keys.
– The knowledge that those records are public, and cannot be deleted, altered or copied, engenders the trust that allows dispersed groups of collaborators to work or transact together on blockchains without the need for an intermediary.
– That trust is reinforced by duplicating and verifying the information across multiple computers in a network.
– For this reason, many original blockchains can’t process more transactions than a single computer in the network can handle.
– This can lead to blockchains being overwhelmed by the volume of work, causing delays and exorbitant costs for users, especially during bouts of intense crypto market activity.
– As of September, Bitcoin was unable to handle more than about seven transactions per second and Ethereum, the second-most popular crypto network, was limited to about 15 per second.
– In short, you can have “scalability,” decentralization or security, but you cannot have all three.
– Computer scientist Hal Finney, who received the very first Bitcoin transaction from the token’s pseudonymous founder Satoshi Nakamoto, flagged early on that blockchains in their original design can’t scale on their own.
– Ethereum co-founder Vitalik Buterin coined the term “Blockchain trilemma” in 2017, laying out the trade-offs required to achieve “scalability.”
– There have been several innovations to improve the performance of blockchains, but a closer look shows that they all water down decentralization or security for the sake of scalability.
– Bigger blocks: a blockchain is altered to bundle transactions into larger packets before they are validated and added to the network, improving its performance.
– New layers: A protocol built on top of an existing blockchain that can manage transactions independently.
– Sharding: Splitting chunks of data into smaller parts to spread the computational and storage workload across the network.
– It wasn’t a problem back when crypto was a niche technology used by a core of enthusiasts. Now that traditional finance and other mainstream industries are turning to blockchains as a transparent, trusted environment for exchange and collaboration, these limitations are increasingly an obstacle.

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