Scalability of Blockchains and Why It Matters

Scalability of Blockchains and Why It Matters

Blockchain is a revolutionary technology having a ripple effect on traditional industries and the global economy. From enhancing operations, transparency, and security, it’s become increasingly clear it is at the heart of the digital revolution. Amid the synergies, its adoption and use case has been hampered by scalability issues.

Understanding scalability

Blockchain started out as a modest project between small groups of people. Initially, it was tailored for the financial industry to enable the easy sending and receiving of money. However, its immutable ledger and decentralization aspect has made it ideal for non-financial applications as well.

Fast forward, it’s gone mainstream, and its use cases have increased exponentially, with millions of people also leveraging it daily. It is currently being used to enhance security and the internet of things. It is also finding great use in the gaming industry, real estate, supply chain, and logistics monitoring.

Scaling the technology to accommodate the ever-increasing use cases and millions of people looking to use it to perform various operations has proved to be a big problem. The scalability issues arise from the fact that it’s becoming increasingly difficult to ensure the decentralized network can accommodate the large and growing number of use cases and users.

The availability of a small bandwidth has complicated the issue. The storage space is also running out, given that one requires a significant amount of space to store the ever-growing operations for reference when it comes to validating operations.

As it stands, the distributed ledger protocol is becoming increasingly full. Conversely, the ability to process more at any given time has slowed significantly. Bitcoin, the most popular project, can only process seven transactions a second compared to Visa, which does not have any scalability issues thus being able to process almost 1700 a second.

Let’s look at some of the factors at the heart of blockchain scalability.

Cost and capacity: The requirement to store data from the first block to the most recent has contributed to the issue. As more applications and users have cropped up, it’s become difficult to get the much-needed storage space. As it stands, not every node has the resources and capacity to enable such a massive storage operation.

There are numerous causes of scalability problems; the illustration below shows some of them.

chart showing scalability issue factors

Networking: The fact that every new action on the ledger must be disseminated to other nodes has also contributed to the issue. The process of broadcasting continues to eat a substantial amount of resources, causing delays in processing times.

Throughput:  It refers to the time required to confirm each new action on the blockchain. As the number of operations has increased, the sizes of the blocks to accommodate them have increased significantly. Given that each node must participate in the verification process, demand for additional resources to enable quick verification has increased.

As blockchain becomes more mainstream, a number of factors continue to make it extremely difficult to scale its operations. 

Below are some of the factors affecting scalability.

Information addition

For a new transaction to be processed on the decentralized ledger, each node must add information on it. The increasing history has always proved to be a challenge as the need to process more increases. The fact that the networks must maintain all the added data without deleting any to create space has only contributed to the scalability issue.

Higher Fees

Users on any distributed ledger must pay some fee to have their transactions processed. As blockchain networks have grown in popularity, actions have grown exponentially. In return, some people have opted to pay higher fees to have their tasks processed much faster. The problem with this model is that it has resulted in many other transactions being left in the queue without processing for a long time.

Block size

Each block on the network had a size of about 1MB and could contain up to 1,020 transactions. The growing number of users and operations has seen a significant increase in the block size. The larger the size of the blocks, the more difficult it’s become to scale the network to process more every other second.

Validation process

The long validation process through which all transactions must go through has also made it extremely difficult for the distributed ledger to process more t at any given time. As it stands, tasks must wait in the queue given the long validation process as it can take up to 10 minutes to build a new block. The wait time can increase significantly during peak times, resulting in the scalability issue.

Scalability solutions

Improving consensus protocols

Most blockchain networks rely on hectic consensus mechanisms that have contributed to the scalability issue. For instance, proof of work leveraged by Bitcoin offers reliable security but is quite slow.

image introducing scalability solutions

Emerging projects are opting for a proof of stake PoS mechanism as it is quite fast. PoS does not require users or miners to solve complex cryptographic algorithms to validate transactions. Validation is achieved by staking a significant amount of the underlying tokens.

Sharding

Sharding is another emerging method that is helping many projects scale their operations. The option entails breaking down operations into smaller data sets which the network processes simultaneously and in parallel.

Nested blockchain

It is a distributed network infrastructure that uses the main blockchain to establish parameters for a much larger system. This option ensures that transactions are executed over an interconnected system of secondary chains.

Bottom line

The increasing number of users and use cases present a unique challenge in scaling many blockchain projects. To address the issue, it is important to first understand the pain points around consensus mechanism, cost capacity, and networking that are making it difficult to scale most projects. Coming up with solutions to address these issues will go a long way in making it easy for emerging projects to process more transactions in the least amount of time.

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