The blockchain trilemma remains one of the fundamental challenges facing blockchain technology, yet to be resolved by the Web3 community.
Coined by Ethereum’s co-founder Vitalik Buterin, the term “blockchain trilemma” refers to the trade-off among three critical aspects of public blockchains: decentralization, security, and scalability.
As improving one of these elements often involves sacrificing another, developers are constrained in achieving high levels of all three simultaneously.
In this guide, we’ll delve into each of the three components of the trilemma, examining why this problem exists and exploring its effects, along with potential solutions currently in progress.
Blockchain Trilemma: Three Pillars
The blockchain trilemma consists of three fundamental pillars: decentralization, scalability, and security. While each is desirable in a blockchain, enhancing one typically weakens the others.
- Decentralization. Decentralization refers to how control and decision-making are distributed among multiple participants in a blockchain network, rather than being centralized in a single entity. Public blockchains enable anyone to participate and access the same data recorded in a distributed ledger, preventing absolute control. However, achieving high decentralization poses the challenge of requiring many nodes to validate transactions and reach consensus, slowing down processing speed and affecting scalability.
- Scalability. Scalability pertains to a blockchain’s ability to support a high volume of transactions per second, store large amounts of data, and efficiently run more nodes to meet demands. Attaining scalability while preserving decentralization and security is a significant challenge. For instance, Bitcoin can process only 7 transactions per second, compared to the thousands managed by centralized networks like Visa, due to limitations in achieving consensus given its decentralization.
- Security. Security in public blockchains is achieved through decentralization and the use of cryptography and consensus mechanisms. The more nodes controlling a blockchain, the harder it is to attack, as there are no single points of failure. However, an excess of validating nodes can slow down data processing speed. Additionally, attempting to enhance security often impacts scalability, not to mention the cybersecurity risks arising from the absence of a central entity controlling permissions.
Understanding Blockchain Trilemma
The blockchain trilemma exists because the three pillars of decentralization, scalability, and security are inherently interconnected in blockchain systems. Enhancing one usually weakens another, as explained earlier.
This is due to the nature of public and permissionless blockchain networks, where there is no central authority overseeing and safeguarding the system. Instead, all participants validate transactions.
The more decentralized a blockchain is (more participating nodes), the more secure it becomes, making it nearly impossible to attack due to the absence of single points of failure. However, achieving consensus with numerous actors slows down scalability.
Conversely, fewer nodes (greater centralization) make it easier to improve scalability and network speed. However, this compromises security, as controlling fewer nodes would be sufficient to manipulate the blockchain.
As a result, developers constantly make concessions, choosing to enhance two of the three properties while sacrificing the third. Therefore, creating public blockchains that are simultaneously decentralized, secure, and scalable is an exceedingly complex task yet to be achieved.
Solving Blockchain Trilemma
While there’s no perfect solution to the blockchain trilemma, developers have proposed various promising approaches to balance decentralization, scalability, and security in public networks.
These proposals fall into two categories: Layer 1 solutions and Layer 2 solutions. The difference lies in whether the changes are applied directly to the underlying architecture of the blockchain (Layer 1) or built on top of the existing network (Layer 2).
Layer 1 solutions include improvements to the consensus protocol, such as Ethereum’s transition from Proof of Work to Proof of Stake for increased scalability and sustainability. Another option is sharding, dividing the blockchain into smaller fragments called shards to process transactions in parallel.
On the other hand, Layer 2 solutions, such as state channels, sidechains, and mesh networks, aim to offload transaction volume from the main chain without altering it. Examples include Bitcoin’s successful Lightning Network or Ethereum’s Layer 2 solutions like Optimism (OP) and Arbitrum (ARB).
While none of these proposals completely resolves the trilemma, advancements by blockchain developers provide a glimpse of a future where decentralized networks can handle much more data volume.
The blockchain trilemma stands as one of the major obstacles to the widespread adoption of this innovative technology, requiring a balance between decentralization, security, and scalability.
The explored solutions offer hope for the development of more scalable public networks that do not compromise their fundamental values. However, achieving the perfect balance among these three pillars remains a considerable challenge in the cryptocurrency industry.