Blockchain

The Scalability Problem of Blockchain

The Scalability Problem of Blockchain
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Cryptocurrencies are becoming more common globally, and blockchain scalability is a problem because the first design of cryptocurrencies is not meant to be common for use. When the transactions daily were small as they are more common in the financial market, issues started developing.

Understanding the Scalability Problems 

Cryptocurrencies like Bitcoin and ethereum compete with popular systems like visas and Paypal; these cryptocurrencies need to increase their work when it comes to transactions.

PayPal performs 193 transactions in a second; a visa performs 1667 transactions in a second, performs only 20 transactions in a second, and Bitcoin performs seven transactions in a second, and the transactions performed in a second can increase if they put more effort on their scalability.

The main reason for the scalability problem in cryptocurrencies are as follows;

  • The time is taken to reach a general agreement 
  • The time is taken to complete a transaction 
  • The time is taken to start a transaction

In bitcoin and ethereum, a transaction goes through when a miner puts the transaction data in the blocks that they have mined. 

Before a transaction can be finalized in bitcoin and ethereum, it’s pass through a software that creates a new unit of cryptocurrency so that it can be mined.

When cryptocurrencies were created, the inventor did not consider many people in mind, but as time went by, more people went in cryptocurrency. The major issue is that bitcoin and ethereum use blocks to complete their transactions, which is slow.

The purpose of the restrictions was to make blockchains safe and faster for everyone, but it has become a problem since the block size determines the number of transactions to be performed in a second. If the number of transactions performed does not increase per second, it will cause big delays and time wasted.

Scalability Solutions 

A lot of developers are working hard to solve the scalability problem in blockchain, below are the proposals for the blockchain scalability; 

Implementing Sidechains

The developers attached a side chain, a blockchain attached separately to the main blockchain, using a two-way peg to make the assets substitute between the side chain and the blockchain at an advance rate.

When a transaction is complete, the side chain and blockchain will have to confirm, and a waiting period is carried out for security reasons.

Off-Chain Channels

The off-chain channels are channels that allow users to perform their transactions without charging them for transaction fees. 

The off-channels work when bitcoin is used to open a channel with another node, and immediately, the channel is open; transactions are performed with the node until the channel closes.

A typical example of the off-chain is the lightning network, which has 15,000 channels and 2000 nodes working actively.

Sharding

Sharding is a technology where a blockchain is broken into multiple units is after being broken each shard move independently and will process transactions.

Developers are working on how Sharding can be improved by cross-sharding, which allows Sharding to share data, and one of the benefits of Sharding is that it reduces the size of blockchain to improve the performance of the network. 

Alternative Consensus Algorithms

One of the causes of blockchain scalability is proof of the working mechanism used to confirm all transactions made. The process involves software that mines to create new units of cryptocurrency by validating transactions and demonstrating proof-of-work.

To confirm a transaction, a reward is sent to the software that mines and confirms transactions via PoW take time. The solutions created to solve the PoW problem reduces the security of the network and makes the blockchain network not centralized to the power.

Therefore if blockchains become more scalable, the network has to be safe and proposed solutions are federal systems.

Batching Payments

Payments in batches have advantages, which helps reduce the size of transactions done in a day by putting multiple transactions in one big transaction. It also helps in increasing the number of transactions done per second.

Besides turning the batch payments into one, it also reduces the transaction fee because you only pay for one transaction fee, which is divided among the parties involved in the batch payment.

There is a limitation to batch payment and how it’s working because it can only work when sent to multiple addresses, such as paying for electricity bills. The other limitation is that some of your privacy might be leaked to the other parties involved in the batch payment. 

Interoperability

Interoperability is one of the proposed solutions for blockchain. Now, bitcoin maximalists are against this idea already because interoperability is the capability of a system to interact and function with others perfectly. They want the user experience to remain the same, and only the scalability problem is solved to increase their service.

A project has been done against the scalability issue. The idea belongs to Frederik Johansson, who wanted to fill the gap in blockchain and make their service faster, which is the library blockchain. 

Libby is controlled by unique Artificial intelligence, has a special security level, and is error-free to make all transactions faster and easier 

Conclusion

Since cryptocurrencies are not centralized, countless possibilities may be presented on the platforms since they are developed for the users.

Cryptocurrency needs to be fully involved in the financial world and be prepared for billions of transactions; it is performed in a day. 

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