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

On this occasion, I am happy to join and do the homework given by professor @nane15 as best as I can.

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

The technical challenges, scalability, security, and decentralization, are often referred to as the “blockchain trilemma”. In fact, the origin of the blockchain trilemma stems from a concept in international economics, namely the impossible trinity. The "Impossible Trinity" theory believes that countries cannot have the following three things at the same time, a fixed foreign exchange rate, free capital flows, and independent monetary policy.

Then Vitalik Buterin also used this understanding to create the concept of the “blockchain trilemma”. This refers to the trade-offs that cryptocurrency projects must make when deciding how to optimize their own blockchain underlying architecture. Trilemma consists of three parts, decentralization, security, and scalability.

The main applications of blockchain technology-Bitcoin, EOS, Ethereum, all face certain technical limitations due to the trilemma. So far, there is no perfect solution to this technical problem. In the context of modern blockchains, the trilemma states that although the ideal blockchain should be decentralized, secure and scalable, in reality blockchains can only implement two of the three. This is a major challenge that blockchain needs to overcome before the technology is widely adopted.

As we all know, the public chain has certain limitations, in fact, this limitation is also an impossible triangle, that is, between the three attributes of decentralization, scalability and security, at the same time the blockchain system can only achieve two of the three attributes. This means that strengthening any two attributes will automatically weaken the third attribute.

2. Is the Blockchain Trilemma Really a Trilemma?

We can honestly say that blockchain is not really a trilemma, and we can also say it really is a trilemma, it's only a matter of time until developers can solve this problem. But for now, we can say that the blockchain trilemma is really a trilemma. In fact, developers are trying to find solutions to the blockchain trilemma, and there are already some suggestions and ideas on how to deal with the "trilemma" that have reached at least a certain degree of success. However, to be honest, even though there has been progress, the trilemma remains a challenge, not that it cannot be solved.

Although some blockchain developers believe that the blockchain data structure itself has inherent limitations that prevent the three from coming together, many software architects believe in the possibility of building scalable, decentralized, and secure blockchains. This trilemma is not unsolvable, but given the current technical challenges, it seems difficult to solve this problem in a short period of time.

Although there are already several blockchains that claim they have overcome this Trilemma problem, just mention Polkadot and Solana who say that their blockchain has been able to overcome this technical problem. However in my opinion it is not perfect and there are still some technical issues. Just look at what happened to Solana's blockchain some time ago, their blockchain was down because it couldn't process data because it was too much.

So my personal view of the entire blockchain currently is still and truly a trilemma, but with current and future technological developments, I believe this will be resolved as it is only a matter of time until developers actually find a solution to the blockchain trilemma.

3. Define the following concepts in your own word: Decentralization, Scalability, Blockchain Security

This is relative to the Centralized concept. It literally means deletion center, which means there is no such thing as an administrator. Every user is the same and has the same authority. If one of them wants to change the content, it must be approved by everyone. Ownership is scattered, does not belong to anyone, and is not easy to tamper with. It is important to note that not all blockchains are decentralized to the same degree.

The advantage of a decentralized network is that it is possible to maintain consensus without having to trust a single authority. Decentralization is also desirable because it increases the robustness of the system. It makes the network impervious to censorship and thus allows everyone to use the network while respecting property rights.

Scalability is an extension of transaction processing, i.e. a limit on how many transaction records can be processed at the same time. In the blockchain mechanism, transaction records are kept by blocking a number of transactions based on consensus building rules called "consensus algorithms" which are predefined for each network such as Bitcoin, Ethereum, and Ripple. Scalability is just about reducing transaction turnaround times to increase the TPS (transactions per second) of the chain and being able to handle more transactions.

Scalability is highly dependent on the performance of transaction processing, i.e. TPS. Facts have proven that scalability is the most important part of blockchain today. The biggest obstacle is that the system cannot be applied to real application scenarios (such as Bitcoin). The main reason for this result is that every transaction must be approved on all nodes and the cost of participation of each node in the blockchain system.

With scalability, Enables the network to support high transaction volumes. And it can also be useful in applications where security is not a priority, for example social media applications. Therefore, scalability can come at the expense of security. Scalability as well, consensus mechanisms should also be improved, which can lead to additional centralization.

Security is the ability of the blockchain to maintain irreversible transactions. It does this by forcing network participants to spend resources on rewards. The more resources a network participant uses, the more secure the blockchain will be.

Take the Ethereum Classic (ETC) attack for example, the attacker resetted over 4,000 blocks and the attacker managed to spend double the ETC worth nearly $2 million. This was successfully done by the attacker because to obtain 51% of the entire network hash power was insignificant compared to the stolen value, so it was successfully done by the attacker. In short, the value in these 4000 blocks far exceeds the resources used by network participants.

The security blockchain enables the transfer of large values ​​that are faster and cheaper than traditional methods. The security of this public blockchain comes from network participants. Higher security implies a higher network effect which is not easy to replicate.

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

The current bottleneck of blockchain networks in large-scale applications is the lack of the ability to rapidly expand capacity, and most networks can only process a few transactions per second according to the design itself. Bitcoin can only process 5 transactions per second, Ethereum can only process about 12 transactions per second. However, second and third generation blockchains have the upper hand in this regard because they have implemented several solutions.

Among the many solutions that can be used, I think the most superior are Lightning Network and sharding. The Lightning Network uses off-chain payment methods to reduce the computational burden of the main chain. As for sharding, it is to separate database servers and share computing load, this solution has grown rapidly and has been adopted by blockchain projects like Ethereum, Zilliqa, and Quarkchain.

• Lightning Network

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The second layer or Lightning Network is a platform beyond the blockchain that includes peer-to-peer transactions between two consenting parties and a third party, monitoring which guarantees the value of the transaction. This L2 solution is exactly the same as an e-wallet payment channel (like Paypal), the transaction rate is very wide and the transaction processing is very fast, but the most important thing is that all transactions are still connected to the blockchain thanks to the Lightning Network. At the end of the transaction in the second layer, the system writes the value back to the main chain of the blockchain.

Simply put, we can understand that with the Lightning Network is the blockchain does not need to record every transaction. Instead, the Lightning Network adds another layer to the blockchain and allows users to create a payment channel between two parties in this additional layer. With the Lightning Network transactions are processed in just a few seconds, and the fees are very low or none at all.

In addition, there is very guaranteed anonymity. At the same time, the security on the blockchain remains very high. Anonymity is granted by Lightning. There is no transaction history here on the Lightning Network. Of course, each user can create such a history himself, but there is no such history on the network itself. Anyone who is not part of the channel cannot track payment transactions. Anonymity is very high.

• Sharding

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Sharding is a horizontal partition design. As a database design principle, it is mainly used to separate database servers and share computing load thus enabling blockchain to solve the problem of low scalability and transaction processing delays.

The adoption of sharding technology in the blockchain means that the network is divided into different shards and transactions are processed in parallel. Each node will only own part of the data from the blockchain network, not all of it, and can process more transactions at the same time.

For example, assuming a network with 1,000 nodes, the network can be divided into 10 areas, each area consisting of 100 nodes, so the overall network processing speed should be increased 10 times.

Conclusion

We can conclude that it is not easy to integrate three elements (decentralization, scalability, security) together into a blockchain, something has to be sacrificed to achieve the other two. But this doesn't mean it can't be solved at all, it's just that people still need time to solve this problem.

Therefore, until now blockchain is still a trilemma. Although there are already blockchains that claim to be able to solve this problem, we still have to wait for the truth as time goes on and more transactions are processed.

While looking for a solution to solve the Trilemma problem on blockchain, people are starting to use alternative solutions to create scalability in their blockchain. This is indeed necessary, because generation 1 blockchain networks are really very slow.