The main focus of any public blockchain project is centered around a few issues. Some blockchains emphasize finding a balance between these issues, focusing on one or two in particular.
Typically, any crypto and blockchain projects revolve around three core elements and concepts: decentralization, scalability, and security. These are basically the challenges that developers face while building blockchain projects.
Vitalik Buterin, the founder of Ethereum, addresses the challenges that developers face in creating a scalable, decentralized, and secure blockchain, without sacrificing every aspect. It is called the Trilemma Blockchain. However, the belief about blockchains is they must sacrifice either security, scalability, or decentralization.
Blockchains are often forced to compromise that prevent them from achieving all 3 aspects:
Decentralization: It concerns the creation of a blockchain system that does not rely on a central control entity like an organization, financial institution, or government.
Scalability: It is the ability of a blockchain system to process an increasing number of transactions per second. It refers to how much a network can grow with time.
Security: It is the ability of the blockchain system to function as intended, and defend against attacks, bugs, and other unforeseen events.
While some developers believe blockchains to have inherent limitations that prevent scaling, there are others who believe blockchains can be built that accomplish all three goals: decentralization, scalability, and security.
The basic elements of the trilemma
The trilemma concerns three main issues developers often come across while building blockchains. These include:
Decentralization
Decentralization is a key element of the blockchain and one of the easiest goals to achieve from the three.
The adoption of decentralized processes and technologies eliminates intermediaries otherwise present in traditional financial systems. Bitcoins and other early cryptocurrencies are decentralized and transparent unlike conventional methods of issuing and storing money.
Decentralized systems are important since they facilitate permissionless ownership, which allows anyone to use and build on the platform. Transactions are approved by consensus rather than by a single entity and cannot be modified after they have been verified by consensus. Therefore, the risk is not centralized and the trust does not depend on another person to complete a transaction.
Public blockchains achieve decentralization through a network of nodes spanning multiple locations. In a public blockchain, a large number of nodes make it virtually impossible to attack since one can trace back transactions to individual nodes. Yet, a higher number of nodes and users slow down blockchain transactions per second. The tradeoff? Compromising on speed and scalability.
Scalability
Scalability is important for mass adoption and refers to a blockchain’s ability to support a higher number of transactions and future growth.
The Blockchain Trilemma indicates that it is possible to meet enhanced scalability requirements, but that security or decentralization might suffer as a consequence. In the current state, blockchain networks cannot compete with legacy, centralized networks, such as Visa or MasterCard because of their higher network settlement times (about 5,000-10,000 TPS). Despite decentralization and security being established on many blockchain platforms, scalability remains the biggest challenge of blockchains. The implementation of sharding in Ethereum 2.0 promises up to 100,000 transactions per second. Scalability is also possible with Layer 1 and Layer 2 solutions.
Related: A Guide to Layer 1, Layer 2, and Sidechain Solutions
Security
As a promising new technology poised to gain traction by improving existing infrastructure, the security of blockchain systems is a top priority. In the wake of high-profile exchange hacks and falsified source code vulnerabilities, many cryptocurrency projects have chosen to focus on decentralization and scalability, leaving security behind.
The blockchain ecosystem should be scrutinized like any other, as all benefits come with the strength of the underlying source code. Blockchains have become a prime target for hackers due to the transparency of their source code and the potential benefits from successful attacks.
Scalability focuses on benefits, while security is equally important and avoids the often-overlooked drawbacks. Promising blockchain use cases are experiencing setbacks that limit their growth. The infamous DAO attack. It is caused by poor source code security.
Related: A Guide to Hard Forks and Soft Forks
Solving the blockchain trilemma
The blockchain trilemma poses significant challenges for blockchain technology adoption. Different methods and techniques are currently in development that can solve the trilemma. The recent Ethereum Merge aims to solve some of the structural problems of Ethereum such as scalability and, thereby, increase the transaction speed and transaction throughput, without compromising on security and decentralization. The end goal is to create a distributed blockchain network that can offer decentralization, security, and scalability.