Scalability and Improvements Made and Still to be made
Today I want to teach us scalability in as simple words as possible. Last class I asked if we should study the SCP today, but most people chose to do it as part of the assignment and from the average score, I can see we all understood the class. Scalability today's topic is one of the few reins hold the world of cryptocurrencies back from taking over centralized finance. Let us see what it is and why it is so.
In general sense, scalability has been defined as the ability of a computer to display different capabilities. In blockchain, and general transactional sense, this means slightly different.
Scalability in blockchain is the amount of transactions per second the blockchain system is capable of computing. For example, Bitcoin processes 5 transactions per second (5 TPS), ethereum 12-15 TPS. This is really poor compared to centralized systems like PayPal and Visa, more details will come on these further down.
Bitcoin, the pioneer cryptocurrency was an early project, flawed in many aspects, and scalability was one of them.
Bitcoin grew exponentially, and at a point, it’s ever growing community noticed the scalability problem. Bitcoin’s scalability faces two determining factors, Block size and Block interval. If the block size is increased, the amount of transactions that will be carried increase, but this will lead to more time needed to verify the blocks. If the Block Interval is reduced, the system is faced with stability issues and will require restructuring. These factors limits Bitcoin to approximately 5 transactions per second and 1 megabyte as block size. The block interval is about ten minutes, which is why you wait about 10 minutes for your transaction to be confirmed.
Bitcoin New Generation (Bitcoin-NG) is a new protocol idealized to achieve low latency and bandwidth while maintaining the trust less system of Bitcoin.
Ethereum and Other Coins Improving upon Bitcoin
Block Size limit of Bitcoin was raised in 2013 but this was not a welcome solution, as decentralization will not be achieved if the capacity needed keeps increasing till only the wealthy could afford to mine.
Vitalik Buterin’s Ethereum came in with more scalability and smart contract compatibility, however this advantage added brought about a new problem that needed a solution. Infinite loops.
Programs on these smart contract blockchains like ethereum are made in a loop, which keeps repeating. Now if people wrote programs that ran infinite loops, and put them on the chain, it will cause a massive clog and breakdown of the system. Transactions and programs on the Ethereum blockchain are paid for using gas fees, and when the gas purchased runs out, the program stops.
Think of it like a city where cars use gas, if everyone rode cars that did not need gas, thee would be increased traffic jams, and mobility becomes a problem, but when people have to fill up gas, or park cars because they are out of gas, there are less vehicles on the road. This solves the question of damage from infinite loops, because no one can pay for an infinite amount of time, also solves the halting problem and improved scalability and we still watch to see what they have for us on Ethereum 2.0
Nano is one of the most scalable blockchains, offering about 7000 TPS, and I want us to delve into why this is so.
Colin LeMahieu’s Nano uses a unique structure, the block-lattice, and this entails every account having a transaction history updated solely by the owner of the account. This system of account-based user personalized block chains is termed “account-chain”. This smart idea subtracted the question of block intervals in the Nano Blockchain. Tests run have shown that Nano maintains its average latency, meaning it can scale possible infinitely (although its POW can produce limitations) as it scales linearly.
Blockchain Vs Centralized Finance Institutions
Everyone believes cryptocurrencies are the future and the future is here. The question is, Why does the future seem to be holdignback from knocking out the past.
Scalability is the battle yet to be won. Taking a very popular centralized finance system, VISA into mind, in comparison to BTC. While BTC crawls at about 5 Transactions Per Second (TPS), VISA acclaims to be flying at least 1700-4000 TPS. This gap is immense and needs to be closed. Although blockchains like NANO has closed the gap with its 7000TPS and 5-10 seconds of block time. If this can be achieved on coins with dominance like bitcoin or ethereum, it would be good for the crypto market at large.
Major Challenges Faced by Scalability
If there are too many transactions on the blockchain, the protocol gets full, the bandwidth and block size can only carry as much as they can. This leads to an increase in block time. Users already complain about the block time and increase in transaction fees.
The Layer One Dilemma
This challenge presented when solutions to scaling bitcoin were being tested. Now I told us that back in 2013, BTC increased its block size, making it more scalable. While this solution worked, it was only temporary because to accommodate a global scale level of adoption, BTC would have to increase the block size more than 10,000x. This is not possible because the computing power required then to mine BTC will be immense and only a few could afford it. This will destroy decentralization.
What about decreasing the block time then, if blocks were created faster, the transactions would be verified faster, but this too came with the inability to be sustained on a global scale. A lot more time would be needed to make sure the blocks being churned out at that rate are valid and this is no easy feat. This method seemed to pose a dilemma too
These two methods are layer one solutions and are not built to last long.
Some solutions were offered on the layer two-level, they are always a cause for debate, and numerous to mention, but let us talk about the popular ones
The Raiden Network on Ethereum and Lightning network on Bitcoin apply this method. This method works by initiating a transaction off-chain but creating a channel between two users. You can perform transactions or run smart contracts through these channels, the result will be added to the blockchain.
The parties involved take a portion of the blockchain and seal it of through a smart contract or multi-signatry
They then perform their activities, independent of the action of the miners
The result of whatever goes on in the channel is then added to the blockchain
Content Delivery Network (CDN)
CDN is the technology behind the internet speed today. From the onset, the internet bandwidth was in kilobytes and loading information took ages, look today how quickly you surf the net with up to 100gigabytes of bandwidth. This speed is supercharged by the CDN.
BloXroute is a company that has decided to aim for global scalability of the blockchain to be just like the internet, by bringing the CDN coding onto the blockchain.
BloXroute 2019 December built BDN (Blockchain Delivery Network). The BDN compresses blocks by using a 4-byte SIDs. This SID is broadcasted to all Gateways and Relays. The gateways replace the SID with the original transaction and the nodes validate it. Tis method is fairly effective.
Other Solutions: They are numerous and would take eternity to
- Faster blockchains like nano
- Nested Blockchains
- Make a transaction on the Binance smart Chain and Tron blockchain (you can use any token)
- Show the time taken for each transaction to be verified (original screenshots must be included)
- Compare the scalability and speed of the two against BTC
- What do you think can be done to improve the scalability of these three (BTC, Tron, Binance Smart Chain)
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