The well-known satirist TH White says, “A king can only work with his best tools.” Well, the same applies to a blockchain, too. For a blockchain does need resources to scale and progressively incorporate new participants into the fold. Resources that can work with the existing ecosystem while adding to its scalability.
Needless to say, blockchain scalability is one of the more important aspects that determine the success of a decentralized project or the blockchain itself. And while there are several Layer-1, Layer-2, consensus-based, and decentralized solutions to improve scalability, the associated blockchain terminology can quickly leave the readers overwhelmed. But wait. We have a way around this conundrum.
Fact Check: Layer-1 scaling solutions are the protocols/technologies implemented on-chain, to improve the existing network directly. Layer-2 solutions, on the other hand, are technologies superimposed on the mainnet, helping the primary blockchain network scale indirectly using side chains, child chains, and more.
- Blockchain scalability is about increasing the resources available to the participants.
- The purpose of scaling a blockchain is to improve transaction speeds and lower fees.
- One can segregate scalability solutions as Layer-1 and Layer-2 fixes.
- Layer-1 scaling solutions include sharding and SegWit.
- Key Layer-2 scaling solutions include state channels, side channels, plasma, and more.
- One can also achieve blockchain scalability if the network incorporates the right consensus mechanism like DPoS and PoA.
The crypto vernacular is diverse. As soon as we start covering one aspect of it, say the token names and technologies, something else crops up to torment us. At present, “Blockchain Scalability” is the talking point, along with its sundry terminologies.
From sharding to SegWit, rollups, and sidechains, there are numerous blockchain terms related to scalability. We, however, shall be exploring only 10 of the trickiest blockchain scaling expressions in this article.
We aren’t going to discuss them from a hardened technical perspective. Instead, we will throw in analogies, stories, and real-life examples to help you understand each term better.
Blockchains, In Simple Words
While there can be many definitions, let’s go with the simplest one. Blockchain is a digital ledger or database that is completely decentralized. This means that any changes made to the same must float past every participant across the network, making it literally impossible to tamper with, hack, or cheat.
A blockchain comprises (quite obviously) blocks, which are like digital records of the transactions made within the network. Every new transaction gets added to a block, which upon completion, gets added to the blockchain upon completion. And yes, this blockchain technology definition is the cornerstone of several existing crypto projects.
Are Blockchains Scalable?
As the previous definition would suggest, every blockchain (used interchangeably with a decentralized network) needs to accommodate several blocks to keep the transactions running. Validations and rejections take place concurrently within the network, depending on how the participants want to proceed, and the built-in technology or code of the blockchain.
However, one thing is certain. As the number of participants grows, the network needs to expand as well to accommodate them. And that is what scalability stands for. Also, every blockchain is scalable to a certain extent. Still, for those that aren’t as expandable, there are several scaling solutions to work with.
Key Terms Related to Blockchain Scalability
Admittedly, 10 isn’t a big number if we want to talk about blockchain scaling at length. But then, we do not want to overwhelm you either. Keeping this in mind, we have chosen not just any random terms but deep-seated scaling concepts that have a massive impact on the current state of expandability.
Once you understand these terms thoroughly, it will be much easier to make sense of how blockchains scale themselves to accommodate new players, new features, and cross-chain interoperability.
Imagine you own a 2,000 sqft house that heats up insanely during summers. Well, you have two air conditioning options to help you cool the premises. You can purchase an 8.5-ton ductable air conditioning unit for the whole house, or you can purchase six 1.5-ton ones so as to put minimal pressure on each while achieving better airflow, uniform cooling, and power efficiency.
The latter is exactly how sharding works. Blockchain developers divide an ecosystem into multiple shards or sharding chains to speed up transactions, minimize latency, and eventually lower the transaction fees. With shard chains in play, the blockchain is partitioned in such a way that one shard needs to handle only one aspect of data storage. This way, it becomes possible to add nodes to the ecosystem without slowing it down.
If this still sounds complicated, just consider sharding as dividing a blockchain into smaller blockchains.
Segregated Witness (SegWit) is a Bitcoin soft fork that became the ultimate scaling solution for the network.
Scalability, as we know, often is about increasing the network size. On a smaller scale, it can also mean increasing the size of the ledger blocks to accommodate a higher number of transactions. Now imagine Bitcoin with a standard block size of 1WU (weight units) or 1MB approximately. This figure means that once the block size of 1MB is achieved, the block moves to the nodes or validators. Once the block reaches this size, the go-ahead is given and the transaction succeeds.
Therefore, if you plan on sending BTC to another address, you might have to queue up to fit in the 1MB block. If you miss the bus, it might take time for the next 1MB block to be completed or get verified by the validators. In some cases, it might take hours or even days for a transaction to get validated.
SegWit is a technique that aims to solve this issue by ensuring the data stored in the blocks is lighter, meaning the signature part of a transaction or the “witness” is separated from the original data set to be sent. This approach makes the blocks more spacious, making them better equipped to accommodate more transactions. And this eventually speeds up the transaction and, as a result, scales the network.
Sharding and SegWit are on-chain scalability solutions. Meaning these solutions can be implemented on-chain or across Layer-1 of the blockchain concerned. But then, not every fix is as intrinsic as an on-chain one. Some need to be outsourced to what we call Layer-2, or the additional piece of tech that prefaces Layer-1 or the base chain.
Plasma is one such Layer-2 scaling solution that works wonders for the overall performance of the base chain. A plasma network is more like a bunch of child chains emanating from the parent chain, such as Ethereum. These child chains can handle transactions independently but at no point are dissociated from the parent chain.
Analogy: Have you ever heard of rivulets and estuaries? Well, a plasma is to a rivulet (or a bunch of rivulets) what the base chain is to a river.
The origin is the same, but the plasma child chains keep tapping into the main ecosystem for security perks. But then, with several chains available to do the heavy lifting, the base chain automatically speeds up. Or, to put it in plain English, it gets adequately scaled up.
4. Lightning Network
Relevant to the Bitcoin (BTC) network, the Lightning Network is a powerful Layer-2 scaling solution that relies on off-chain fixes to scale the ecosystem. Designed to be able to handle transactions, the Lightning Network uses smart contracts to automate BTC transfers. This approach minimizes the load exerted on the main network.
And the best thing about the Lightning Network is that miners and validators can take their time to confirm blocks, as the receiver gets a virtual confirmation via the smart contracts. To simplify, the Lightning Network works more like the Buy Now Pay Later (BNPL) scheme, but only with far more credibility.
This one is the easiest Layer-2 solution to understand as sidechains do exactly what you expect them to do if you go by the name. Sidechains are like the branches to the main chain; they are effective enough to tap into the resources and information repositories of the main or parent chain.
Sidechains can run their own set of codes, Smart Contracts, and process transactions without being overly dependent on the parent chain. But every insight is eventually sent to the origin nevertheless.
Still not sure as to what a sidechain is? Well, the most obvious example would be the Polygon network, which is a sidechain to Ethereum. But Polygon does a lot more, and we shall discuss the same later in this article.
Also, unlike plasma or child chains, which are always rooted to the parent chain, move vertically, and utilize the elementary security safeguards better, sidechains are more horizontal and work more independently than the former.
6. State Channels
Imagine you want to shop for medicines, groceries, fruits, and toiletries from four separate local shops that all accept online payments. Considering that the shop owners know you, you can make individual purchases quickly and get out of the shops in an instant. That too without having to take out your wallet or try sending money online over an unsecured network. Later, at night, when you are all done for the day, you can release the payments, and the shop owners can send you a receipt for the same.
Sounds convenient and fast, right?
Well, that is exactly how state channels work. They establish a two-way pathway between the parent chain and the trivial transaction channels that could be located anywhere. And the credibility factor or the faith is taken care of by multi-signature modules and smart contracts, much like the Lightning Network that we discussed earlier.
In simple terms, state channels are the scalability terms or solutions meant for speeding up blockchain transactions by only sending a virtual version of the crypto. At any time of the day convenient to the user, the transactions are released, and the funds are actually transferred, with transparency intact.
However, you need to have actual funds locked in one place for state channels to function. Just the way you need to have actual funds in place to be able to pay the shop owners at the end of the day.
7. Byzantine Fault Tolerance
While Layer-1 and Layer-2 scaling solutions are effective enough, it all comes down to how fast the transactions are verified within the network. And that is where Byzantine Fault Tolerance (BFT) comes forth as a scalable consensus algorithm.
In simple terms, the BFT consensus signifies the ability of the blockchain to validate transactions constantly, despite a certain percentage of the network being plagued by adversarial agents or miscreants. From a mathematical perspective, if ‘N’ is the number of faulty nodes in an ecosystem, the network can still function at usual speeds if there are ‘2N+1’ good nodes in the picture.
8. DPoS (Delegated Proof-of-Stake)
Don’t we all know how efficient the Proof-of-Stake consensus mechanism is when it comes to making a project environmentally efficient? Well, sprinkle it with the “delegated” bit, and you get a highly scalable, delegated proof-of-stake consensus mechanism to work with.
DPoS ensures a random delegation of staking rights to specific token holders, making the space more collaborative. And this approach even weeds out the underperforming validators once a cycle is over. Yes, some might argue that the power resides in the hands of select participants, but the speed and scalability more than makeup for the same.
While DPoS is an excellent scalable solution, it still requires the participants to stake their tokens. In a Proof-of-Authority ecosystem, participants stake their credibility, reputation, or identity to increase overall network throughput.
The underlying concept behind this scalable solution is that credible and authoritative nodes are always expected to be fair and take quick decisions to help keep the network speeds up consistently.
Polygon, the ultimate Layer-2 scaling solution for Ethereum, requires a special mention. Primarily a sidechain, Polygon also works closely with Plasma, rollups, and the PoS (Proof of Stake) consensus algorithm to solve persisting Ethereum-specific issues, like high gas fees and lower throughput.
Here is a detailed post on Polygon to help you understand the project and MATIC token better.
Each of these 10 scaling expressions is important. They all deserve to be discussed at length individually. But they are not all of the main ones. ZK Rollups, Optimistic Rollups, Distributed Ledgers, and DAGs are some of the other terminologies that deserve similar attention, and there are many more. While covering all of them in one go seems like a stretch, there is no need to be disappointed. Do expect to hear us talk about every blockchain scaling solution and term at length across topics.
Blockchain scalability is more like treading on a highway with multiple lanes and vehicles, each aiming to serve a different and exclusive purpose. And hence, we don’t want to leave anyone out.
For now, don’t forget to read this detailed post on Blockchain Scalability to understand the broader concept better!
Q1. How can the scaling of blockchains be done?
A1. A blockchain can be scaled by dividing it into smaller blockchains, speeding up the validation process, adding a Layer-2 scaling solution, or finding a way to take certain tasks off the chain only to send the data back on-chain when convenient.
Q2. What makes a blockchain scalable?
A2. The ability of a blockchain ecosystem to maintain lower fees and higher throughput even when participants flock to it is what true scalability is all about.
Q3. What is the most scalable blockchain?
A3. If we are talking Layer-1 or true on-chain scaling, Solana is truly the most scalable blockchain with the potential of reaching 50,000 transactions per second.
Feeling confident enough! Well, read more and learn other crypto and Blockchain-relevant topics, at CoinSwitch.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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