[REPOST] Blockchain Trilemma - Crypto Academy / S5W2 - Homework post for nane15 by @blessingkasabe

in hive-108451 •  3 years ago 

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Hello everyone, I am very excited to write and participate in this homework task for the new season (season 5). I am here to write and submit my homework task posts assigned by professor @nane15. It's been a privilege to join his class for the first time this season. I have read and understood the lecture about Blockchain Trilemma, Decentralization, Scalability, and Security and I would like to submit my response to the assignment below.

Explain in your own words what the Blockchain Trilemma is?


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Blockchain is a decentralized digital public ledger that records ad stores data and makes it very difficult to be hacked or deleted/altered. Blockchain has significantly improved the daily activities of Humans around the globe. The Blockchain network has improved the exchange of currencies and other information by bringing transparency and security between transactions. Blockchain technology has also brought about the less costly and efficient method of making transactions or sharing information around the globe. Blockchain has again created decentralization in the crypto world. With, blockchain, users can now transfer or transact business both online and offline without any hindrance from higher authorities because of its decentralized nature.


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The Blockchain one way or the other does have its downfalls no matter all the benefits it gives. These downfalls or disadvantages must be tackled in order to continue the smooth running of the blockchain network. The Blockchain network constitutes three main features on its platform and they include decentralization, security, and scalability.
These three features are what came together to form the "Blockchain Trilemma". The blockchain trilemma was discovered by Viatalik Buterin (the Ethereum CEO).

Blockchain trilemma is a concept that dictates the three issues ( decentralization, security, scalability) that developers face problems with during the time of building blockchains. In the early 1980s, computer scientists developed a theorem called the CAP theorem which states that;

"According to the CAP theorem, decentralized data stores — of which blockchain is an iteration — can only provide two of three guarantees simultaneously: consistency, availability, and partition tolerance (CAP)"source.

From the quote above, it is now believed or considered that the public blockchains have to sacrifice either decentralization, security, or scalability in their development leading to the Blockchain trilemma.
Different technologies have been implemented by the two most trending networks that are Bitcoin and Ethereum on how to find a solution to this trilemma. The Bitcoin network with the use of the Proof of Work (PoW) technology has been able to make their network more secured and decentralized but lacks the solution to scalability. With this, the issue of scalability still co-exists in the Bitcoin network because of the use of the PoW consensus mechanism in validating blocks on the network.

Moreover the use of the Proof o Stake Consensus mechanism helps to reduce the stability issue a bit but again, decentralization is also the most pressing issue in the Proof of Stake networks. This Proof of Stake Consensus mechanism only provides selected stakers to participate in verifying transactions thereby increasing scalability in the network. Several blockchains have tried in solving this trilemma issue but most of them end up solving two and leaving one behind as we just saw in the PoW and PoS consensus mechanisms. It becomes very difficult for them to emerge the three issues and find a single solution to them without leaving any behind.

The following include some of the networks that tried to solve the trilemma issue and ended up solving two of them and leaving one behind; Solana network, Polkadot network, Cardano network, etc. The majority of these networks ended up improving the scalability issue and leaving the rest behind. These networks including others as well are putting things in place so as to come out with a solution for this trilemma issue.

In addition, various organizations and businesses are putting things in place in developing layer 1 and layer 2 solutions in order to solve this trilemma issue. Layer 1 is defined as blockchain networks that are built for security, growth, and speed purpose whilst layer 2 is defined as the products and technology optimizations that can be utilized with the present blockchains in order to improve their scalability issues. When the right balance is able to be created between layer 1 and layer 2, then this can aid in solving the issue of the trilemma.


Is the Blockchain Trilemma Really a Trilemma?


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The blockchain trilemma can not really be considered as a trilemma because, the three characteristics of blockchain in occurring simultaneously. There have been other networks that are working tirelessly to find solutions to the blockchain trilemma issue.

It is seen in the news that Algorand has managed to find a solution to the blockchain trilemma by employing randomness in solving the blockchain trilemma. Algorand achieved scalability y maintaining decentralization in the blockchain network through random selection of validators from all token holders available on the network. These random picking or selecting helps to maintain decentralization in the blockchain. Also, there is security maintenance as well since no one can predict when he/she would be chosen. Scalability is as well maintained thereby addressing all the three issues termed as the blockchain trilemma.


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From the above solution proven by Algorand, this tells us that the blockchain trilemma isn't something trilemma but rather it can be solved as we just saw. The blockchain trilemma as I explained early also gives the importance of these three features in the blockchain network. With all the above information, I would say that the blockchain trilemma is not really a trilemma as we think.


Define the following concepts in your own words: A. Decentralization B. Scalability C. Blockchain Security


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Decentralization:-

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It is the first and foremost feature that is implemented in the blockchain network and also the easiest as well. It involves a system whereby there is no central authority controlling or regulating the network but rather a system whereby all participants involved in the network are given equal chances in decision-making in order to improve the system. Decentralization is a permissionless network and this permits miners to contribute via confirmation of transactions. There is equal control in a decentralized system of blockchain. This means that in a decentralized blockchain network, one can not regulate the network in his/her own way without approval from the other nodes involved in the blockchain network.

Decentralization provides more freedom to its participants than in the case of the centralization system. It has also made transactions more secure and also transparent in the blockchain network.

Advantages of Decentralization

  • Decentralization provides equal authority to all its participants thereby creating freedom and transparency in the blockchain network.

  • Decentralization provides an enhancement in the security level of blockchain networks.

  • There is more transparency in using decentralization

Disadvantages of Decentralization

  • There are conflicts in the decentralization system due to high pressure on the divisional leaders

  • There is a high cost involved in the decentralization system.


Scalability:-

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Scalability is the rate at which a transaction is being verified on a blockchain network. It measures how fast a number of transactions can be verified within a stipulated time. A network is said to be scalable when there is a higher number of transactions performed on the blockchain per second. In a nutshell, the scalability of a blockchain network is its ability to be able to maintain the increasing load of transactions on the network and also the increasing number of nodes in the blockchain network.

Usually, scalability is dependent on the type of consensus mechanism present on the network and also the number of nodes required to validate the blocks. Looking at the consensus mechanism of BTC that is the Proof of Work mechanism has a scalability of 10 minutes in verifying transactions on its blockchain. This indicates that Bitcoin can perform about 6 transactions per second. Other PoS blockchains can perform over 1000 transactions per second on their blockchain networks.

The issue of Scalability on blockchain networks is one of the most needed things that must be looked at and resolved.

Advantages of Scalability

  • Scalability helps to improve certain protocols that need a higher number of transactions in their applications, these protocols or projects include video streaming platforms, gaming platforms, messaging apps, etc.

  • Scalability also allows networks in supporting a higher workload under extreme conditions without paying high fees on the blockchain network.

Disadvantages of Scalability

  • The use of scalability involves developers sacrificing security in order to make their network scalable.

Security:-

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Security as we all know is one of the most important features of every blockchain network. Security on blockchains helps to prevent hackers and fraudsters from disrupting and manipulating the ledgers on the network. Every blockchain network's first aim is to protect its network from the 51% attack of fraudsters and hackers.

Blockchains that are found prone to attacks or hacks are because of the use of smart contracts, and also its technology is based on open-source technology when everyone has access to the code. Security and Scalability can be observed to possess two opposite aims or goals. That is, security functions to keep the network stable and functioning at a good state whilst scalability functions in growing the system ahead.

Although, there have been hacks and attacks on blockchain networks, the security level in the blockchain is as well strong and tight because until one gets access to it unless he/she is able to manipulate and change the hash code of the blocks on the blockchain.

Advantages of Security

  • Security helps in keeping safe transactions performed on the blockchain network.

  • It also provides or enhances transparency in transactions performed on the blockchain network.


Based on your knowledge, explain at least two viable solutions to the challenges posed by the Blockchain Trilemma


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The blockchain trilemma challenges can be solved in two forms of layers called layer-1 and layer-2 solutions. I would briefly explain these two layers and what each layer entails.

Solving the Blockchain Trilemma using the layer 1:-

As I said earlier in this post that the layer 1 refers to blockchain networks built for growth, security, and speed purposes such as Ethereum, Bitcoin, and Litecoin. Layer-1 includes improvements of consensus protocols and Sharding.

Improvements In Consensus Protocol:- Most blockchain networks utilize the Proof of Work (PoW) consensus algorithm mechanism. Although it is slow it's also a very secured consensus mechanism protocol. As we can see that scalability is what the Proof of Work network lacks and faces as a challenge. As a matter of that, the PoW algorithm mechanics has to be improved and upgraded to the Proof of Stake mechanism which would then improve scalability as well on the various blockchain networks such as Bitcoin, Litecoin, etc.

As a matter of improving the scalability of the Ethereum blockchain network, they have improved their network to Etheruem 2.0 which favors the Proof-of-Stake consensus mechanism. This has helped improve the scalability performance and also increases decentralization as well as improving security on the Ethereum network.

Sharding:- Sharding is also one of the adapted methods in the layer 1 solution for the blockchain trilemma. Sharding is a process that breaks transactions into smaller sets of data which is called shards which are concurrently processed parallel in the network. These smaller data sets (shards) provide proof of the mainchain of the network and also interact with each other in sharing balances, addresses, and also the overall state of the network by using the cross-shard communication protocol. The following blockchain networks employ the use of shards in their dealings; Ethereum 2.0, Tezos, Qtum, and Zilliqa.

Solving the Blockchain Trilemma using the layer 2:-

Similarly, as explained earlier that layer-2 refers to the technology that is used to ensure there is improvement in the scalability issues in the blockchain network. This layer-2 comprises the following; State Channels, Sidechains, and Nested Blockchain.

State Channels:- State channel helps to improve the transaction speed and capacity of a blockchain network through the use of various mechanisms. The state channel again enhances a two-way communication between the blockchain network and off-chain transactional channels via different mechanisms on the blockchain network such as a smart contract mechanism or a multi-signature mechanism. State channels in the blockchain trilemma, in order to achieve greater scalability, sacrifice some amount of decentralization before it can attain that aim. Examples of networks that use the state channels include the following; Bitcoin Lightning, Ethereum's Raiden Network, Liquid Network, and Celer.

Sidechains:- Sidechains are used for large batches of transactions through the use of an independent consensus mechanism to that of the main chain. This helps to optimize the scalability and speed as well. Sidechains are publicly recorded unlike in the case of state channels where they are privately recorded. A little effort or work is needed in creating sidechains as compared to that of state channels where there is not a high amount of effort required or needed in its establishment.

Nested Blockchain:- this is a decentralized network platform that employs the use of the main blockchain in setting up parameters for use by the broader networks when execution is ongoing. The execution takes place on an interconnected web that contains secondary chains. During the process, the parent chain also called the main chain delegates work to the child chain or secondary chain to do and it transfers it back to the parent chain after processing.
Scalability is improved here when the burden on the mainchain is reduced during its process.


Conclusion


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To conclude I would like to summarize what we have done so far in this article. First of all, we discussed the concept of the Blockchain Trilemma and we also provided examples as well. Again, we discussed whether the Blockchain Trilemma is really a trilemma or not where I said it is not in my case.

Furthermore, We discussed the concept of Decentralization with advantages and disadvantages as well. We also explained Scalability with advantages and disadvantages, and also we discussed Blockchain Security with its advantages and disadvantages on the blockchain network. Finally, we discussed some viable solutions to the challenges that are posed by the blockchain trilemma. And we discussed this with respect to layer-1 and layer-2.

I would like to say a very big thank you to professor @nane15 once again for this wonderful lecture. I have really understood the concept of the Blockchain Trilemma Decentralization, Scalability, and Security. Thank You.
As a matter of doubt I leave behind links to references of my work:

Reference 1
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Reference 5

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