Markets Technology

Effective Ways to Solve the Blockchain Scalability Issue

May 15, 2018


Effective Ways to Solve the Blockchain Scalability Issue

The very first blockchain technology, Bitcoin, was launched almost a decade ago and excitement around the industry has been building ever since. The concept of decentralized virtual currencies at one time seemed far-fetched but it is now looking towards mainstream adoption. The technology carries sufficient potential to revolutionize most industries. But that is not to say that the model is completely problem-free.

One of the issues that has continued to rear its ugly head when it comes to the blockchain technology is scalability. Blockchains are to a great extent severely limited in terms of capacity to scale. What makes it particularly hard for the innovation to scale is the nature of its consensus protocols. At the moment, all participant nodes on any given network have to process every transaction that takes place within the network.

This is what lends the model its inherent decentralization feature and robs it of the ability to scale. This means that in order to scale the blockchain, we have to address this pertinent issue first. There are a number of solutions that have been proposed to that end.

Four Ways to Scale the Blockchain

  • Off-Chain Transactions

One possibility of scaling the blockchain is by pushing most of the transactional activity off the mainchain. This system would have sidechains that handle the smaller activities and only record the result on the main blockchain.

This is the concept behind the Lightning network that has been proposed for Bitcoin scaling. It basically comprises an additional layer of framework that can be grafted onto the original in order to implement the changes. Participants using the network would be able to transact offline and the mainchain would automatically update to reflect the transaction details.

The main problem with this system though is that the sidechains too will require maintenance and unfortunately, they do not have a reward scheme. This means it would have to incorporate a reward system to incentivize its miners.

  • Smaller Networks with Fewer Nodes

The number of participant nodes on any network determines its capacity to scale. This is one of the factors that have made it difficult for Ethereum blockchain to scale as it has about 25,000 nodes on its network. Having a smaller network comprising fewer nodes would mean getting a consensus on transactions much faster.

This system has been adopted on private blockchains and made it possible for them to have much higher speeds than their public counterparts.

  • Increasing Block Size

The Bitcoin blckchain again presents an interesting case in point for this scaling solution. Satoshi imposed a 1MB block size to keep the Bitcoin network from being spammed. But this limited capacity has taken a toll on the network. Increasing the block size would mean more transactions can take place on every block meaning more money for miners. At the same time, this will keep transaction costs reasonable as there will be no major backlog causing fees to spike.

  • Changing to Proof of Stake

Proof of Work (PoW) is the most common consensus algorithm used on blockchain platforms. It entails the use of specialized hardware to solve crypto puzzles so as to generate new digital currency coins.

The Proof of Stake (PoS) model on the other hand has validators in the place of miners. They stake up a specified amount of the network’s token and start validating blocks by betting on them. When a block is approved, the validator gets a reward. But if a block is malicious then they lose their stake.

The Casper consensus algorithm is the implementation project for PoS on the Ethereum blockchain. Its implementation will lead to a massive reduction in electric energy consumed during mining activities. PoS makes use of a virtual process and does not require costly machinery or massive electric power consumption.

This system will also make it more difficult to execute a 51% attack that usually happens when a malicious attacker gains control of the majority of nodes on a given network. The staking process will also limit malicious activity since validators would be keen to retain their staked tokens.  Most importantly, the system makes it possible for the network to scale through Sharding.

Sharding involves breaking down a transaction into constituent portions and distributing them across a network’s nodes. The nodes work on the small portions side by side and thus complete the process faster.

The Bottomline

When the blockchain first came into existence, it was not designed for widespread adoption and use. But its growing popularity has made it crucial to implement a scaling solution that will increase functionality and lead to more widespread adoption. Every one of these solutions has its upsides as well as unique challenges. But the future of the blockchain lies in the ability to identify and implement an effective scaling solution as soon as possible.