Blockchain Trilemma - Crypto Academy / S5W2 - Homework post for nane15.

in hive-108451 •  2 months ago 

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1
Explain in your own words what the Blockchain Trilemma is.

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What could be called the Blockchain trilemma originates with the CAP THEOREM. This is a theorem developed by a computer scientist in the 1980s as regards decentralized systems. The theorem was proposed due to the many challenges facing the workability of decentralized networks. According to the theorem, decentralized platforms can only simultaneously achieve two out of the three core characteristics of decentralized systems namely: consistency, availability, and partition tolerance.

The modern distributed network Blockchain is an upgrade of an existing decentralized system concept and therefore the same problems are yet fundamental. The "cap theorem" has now transformed to what is known today as Blockchain trilemma.

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Blockchain trilemma is the notion that public Blockchains can only achieve two out of it's three basic characteristics simultaneously - scalability, security and decentralization.

Public Blockchains should at least have these three basic features. Moreover, the difficulty arises for developers to achieve these three at a time without sacrificing one. A typical example is the proof of work consensus algorithm on which Bitcoin the lead cryptocurrency operates. While the consensus algorithm achieves high security and Decentralization, it has sacrificed scalability since Bitcoin can only achieve 4.6 transactions per second. On the other hand, a centralised network like visa achieves 1,700 transactions per second. If we are to make the comparison, Bitcoin is far from being scalable when compared to centralised systems.

2
Is the Blockchain Trilemma Really a Trilemma?

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Put simply, yes! If public Blockchains must compete with centralized systems and receive more and more adoption, it will need to find a solution to the three basic key features of Blockchain.

As I have pointed out above, centralized systems still have upper hand in terms of throughput. Blockchain's first consensus algorithm has been applauded for it's transparency and security, yet it lacks scalability. Some other consensus algorithm employed by Blockchain like the proof of stake consensus algorithm has stepped in to solve the scalability issue but somehow not secure like the proof of work consensus algorithm.

The fact remains that Blockchain is facing a trilemma. Centralized Networks functionality is that of server-client relationship. Decentralized networks operates differently; unlike a central server, the network is managed by different nodes across the network to achieve a consensus. Managing these distributed network, achieving transparency, having a network that is hack resilient and at the same time achieving scalability is not an easy task for developers. Meanwhile a workable solution to these issues facing Blockchain will definitely lead to more adoption of Blockchain and would have solved the trilemma.

Now Let's look at these key features of Blockchain one after another.

3
Define the following concepts in your own words:

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1• Decentralization

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Centralised systems has a central control, all decisions and operation of the platform is controlled by the owners or the central entity. On the other hand, decentralization removes one single entity as a source of control but allow a distributed network consistently of different nodes (Computers). It means that no single person has absolute control but consensus is achieved through the many nodes participating in the network.

The elimination of intermediary extends to all users of the network. Decentralization allows for peer to peer transactions amongst members without the middle person like banks or other intermediary. The advantage is that the profit made by these intermediaries returns to the people. Another benefit is transparency which is not mostly observed in the centralized systems, yet, one drawback is lack of thoroughput.

2• Scalability

A Blockchain network is scalable when it can accommodate high transaction thoroughput and can adjust to heavier load as the network expands.

Centralized Networks process lots of transactions per second. Just like the example cited in the previous subtopic, visa has the capability to handle 1,700 transactions per second, that makes it more scalable than Bitcoin network which transaction per second is less than 5. Since this is the case, just imagine when many transactions are happening at once on BTC network, it means that lots of transactions will be on cue and this will definitely delay transaction completion time. A person initiating transaction will have to wait longer than required for his transaction to get completed.

The Blockchain trilemma propose that when a Blockchain achieves scalability it may sacrifice either of the two core features - security and scalability.

3• Security.

A secure Blockchain network is a network that is proven to be free from hacks and manipulation. This is especially important due to the threat of 51% attack where group of bad players may have above 50% control of the blockchain network. While they may not disrupt the entire ecosystem, they may create problems like double spending, they can even reverse already sent transaction.

Without security, people can disrupt the network. Among the reasons why decentralized networks are not as secure as centralized Networks is that it is open source. Even Hackers can read and understand the codes, therefore, they can concentrate effort on how to manipulate the system. Without strong security, it will be easy for people to disrupt the network, however when a network has strong security it may sacrifice scalability based on the CP theory.

4
Based on your knowledge, explain at least two viable solutions to the challenges posed in the Blockchain Trilemma .

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The question facing us now is: how do we solve the Blockchain trilemma issue?
The best two proposed idea is the layer 1 and the layer 2 solutions.

Layer 1 solutions.

This solution is the concept of building a Blockchain that posseses all the three basic characteristics of a decentralized system - A Blockchain that can be scalable, secure and decentralized. The current Blockchain that are close to solving these issues are the web 3.0 Blockchains.

An example of such innovations is polkadot. Polkadot is a web 3.0 Blockchain utilizing the Nominated proof of stake consensus mechanism. (Npos). This consensus mechanism solves the proof of stake ( pos ) issue of "the rich gets it all " model. Nominated proof of stake allows for more democratic governance ensuring more Decentralization. Polkadot has proven to be secure and scalable and with the nominated proof of stake, decentralization is not completely sacrificed.

Another solution now making wave in the Blockchain sphere is Solana and it's proof of history consensus model. Whereas proof of history (Poh) is not a new consensus mechanism, it is an upgraded technology in conjunction with proof of stake consensus mechanism that boosts to be the fastest Blockchain ever. Solana has proven to be fast with the ability of handling 50,000 transaction per second. With the use of proof of history, the network is equally secured.

Solana is a new technology yet to be proven overtime over its many claims. On September 14, 2021, for a period of 17 hours the Solana Blockchain experienced an outage stocking investors money inside. The outage was blamed on bugs and some other speculations. Right now, we are still waiting to see how this project functions in the long run.

Ethereum built on proof of work consensus and the second most important crypto is another blockchain utilizing layer 1 solutions to solve the Blockchain trilemma. It's decision to transition to web 3.0 in it's Ethereum 2.0 solution will be another technology to watch.

Layer 2 solutions.

Layer 2 solutions is the building of a network on top of an existing Blockchain to lighten it's load.
The main focus of the layer 2 solution is to solve transaction speed and make the network more scalable. Most layer 2 solutions handle transactions outside the main Blockchain and thereafter update the data in the main Blockchain. With such solutions, proof of work consensus algorithm networks like BTC and Ethereum can achieve speed while maintaining the security and decentralized nature of the network.

Example of the the layer two solutions are the
Lightning Network built for Bitcoin network and
Plasma built on top of Ethereum network.

5

Conclusion.

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Blockchain trilemma is yet an issue facing Blockchain. It is not easy for developers to develop a code that can be secure, scalable and decentralized. The reason is that one works against the other, a secure network may compromise scalability. A scalable and secure network may affect Decentralization.

Hopefully, there are solutions to the trilemma issue. One is building a Blockchain comprising of the three characteristics. This process is achievable based on the new rise of web 3.0. Another is using layer 2 solutions to enhance speed in already secure and decentralized networks.

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@nane15

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