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

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This being my first post for this week of cryptoacademy courses for season 5 and week 2, I will be answering the questions on the topic of Blockchain Trilemma by professor @nane15.

Explain in your own words what the Blockchain Trilemma is?

INTRODUCTION

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The concept of a Trilemma is one that has been in existence for a long time as it cuts across a lot of fields.

Before trying to talk about the blockchain Trilemma it is pertinent to understand what these concepts mean individually and then we can see the relationship with one another.

Blockchain

A Blockchain is a type of technology which employ the use of Cryptography to record data in such a way that it prevents change or duplication.
As more data is added to the network more block are being formed in the chain.

This system is what has made use of Cryptography very popular as each cryptocurrency Blockchain perform the same underlying operations but are each uniquely different.

Trilemma

The Trilemma like a dilemma is a decision making solution. But unlike when one has to choose between the decisions, a Trilemma offers three decisions but only two can be viable at the same time negating the third.

This process cuts across a lot of field from finance, government and also the blockchain technology.

Blockchain Trilemma

A Blockchain Trilemma in this instance is a problem encountered by developers, here developers have three options but only two would be viable making them have to for-go one of them.

The three cases are the blockchain Decentralization, it's scalability and it's security.

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All are important and developers have to make the uneasy decision of forgoing one depending on how much more important the other two is needed.

Decentralization ensures that no central authority is in charge of the blockchain.

Scalability is the ability which the blockchain is able to process it's transactions some are faster than others.

Security indicates that the data is not prone to unauthorized changes and the blockchain security is one of the reasons we have so much trust in cryptocurrencies.

Building a Blockchain requires sacrificing one for the other two, this is what is meant by a Blockchain Trilemma.

2 Is the blockchain really a Trilemma?

Although the concept of a Trilemma in the blockchain is very much in existence. It's difficulty to implement by most blockchains doesn't necessarily mean it cannot be done.

Removing Decentralization means that the essence which cryptocurrencies were initially created has been removed. Meaning there is an authority controlling them.

Removing security means that transactions might not be safe anymore and data could be manipulated. We could even have instances of double validation of a transaction.

Removing the scalability means that the fast transactions we get would be a lot slower.

All of this are very important for a Blockchain existence and is claimed to have been achieved in Algorand.

Major consensus mechanism which are commonly used are proof of work PoW and proof of stake PoS.

The proof of work as is known is less scalable as transactions have to first be validated by miners competing to solve puzzles in cryptography hence a lot of time is lost as only the miner who first acheives this is rewarded.

Proof of stake on the other hand is more scalable but it's security is still under doubt and hasn't been verified to be effective as that of proof of work.

Algorand solution to this is the PPoS otherwise known as the Pure Proof of Stake. It depends on having majority of money in the hands of honest users and less in the hands of dishonest ones.

Although still in the works, the solutions profered by Algorand, Cardano and the likes only prove that it is possible to solve the blockchain Trilemma and we can hope to see a working one in the future.

In essence the blockchain Trilemma might be difficult but isn't necessarily a Trilemma after all.

3 What are the definition of the following concepts in your own words.

•Decentralization

The concept of Decentralization as the name suggests implies there is no single authority in control, and this is one of the core foundation of most blockchain networks.

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Like the Bitcoin Blockchain, the system is based on a network of computers which forms a kind of peer to peer system and doesn't warrant the need for a third party for transactions to be processed.

It was the need to create a source of exchange that didn't conform to things like the centralized nature of already existing financial institutions that prompted the creation of the first cryptocurrency.

Although there are system which are centralized, Decentralization is one of the things that sets the cryptocurrency Blockchain apart from other means of exchange. Here every user is a link in the network with users having access to the same data and not susceptible to data manipulation.

ADVANTAGES

• Decentralization of a block chain means that it is not a project of any nation.

• It reduces susceptibility of the system to attacks as data isn't centrally stored.

• Useful in tackling security challenges as data can easily be accessed by all parties.

DISADVANTAGES

• For cases when something goes wrong, changes have been known to be difficult to make.

• Decentralization is technically not easy as building such a system can be Complex.

• Such systems are not known to have user friendly interface.

SCALABILITY

The scalability or what is known as scaling capacity of a Blockchain is it's ability with which its consensus mechanism can process transactions over a time period on the network.

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By increase in the number of transaction, the blockchain best able to adapt and still perform functions faster has the better scaling capacity.

When comparison is made between two networks the one able to process more transaction in a time period is said to have better scalability.

ADVANTAGES

• Faster processing of transaction.

• It improves time saving which can be used for other transaction.

• It increases system reliability and trust of a Blockchain network.

DISADVANTAGES

• Faster transactions do not always mean the transactions are very secure.

SECURITY

Security is one of the most important aspects of a Blockchain network existence. Most traders will only trust a network of the security has been verified.

Although for an age of high technological advancement, cyber attacks and online hacks have almost become common. A closer look shows that most of this actually occurs on centralized systems more than decentralized ones.

Security is essentially the backbone that ensures the trust needed by the blockchain to thrive and also compete with others.

Mostly this is due to use of Cryptography in Blockchain technology, with this data is encrypted in a way that prevents malicious altering of the system.

A Blockchain network is only as important as how it's users view security of their funds.

ADVANTAGES

• The more secure a Blockchain network is, the more willing users can invest their funds.

• Security can not be compromised as leaving weak structure invites hackers to try to manipulate the system.

DISADVANTAGES

• Although most blockchains try as much as possible to make their network secure, third party wallets used in securing cryptocurrencies might not be as secure leading to hacks.

• Blockchain application have crossed into other fields, all of this is usually experimental as compared to in cryptocurrencies and loopholes can easily be taken advantage of by users with malicious intentions.

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

As mentioned earlier the blockchain Trilemma is still a challenge faced by many Blockchains in developing their network.

There has also been ongoing research in trying to provide workable solutions to this problem.

Solutions for this have been posed differently in what is known as first layer and second layer solutions.

•First Layer Solutions
This technique is by solving the problem at the beginning, one of those who claimed to have done this is Algorand which I mentioned earlier.

In what is known as the Pure Proof of Stake PPoS. This requires users to already have their tokens or funds.

For the first block a token is picked at random from the users by the algorithm and the owner forms the first block.

Then a lottery is placed by all owners of tokens and a committee is formed according to the winners of the lottery. This lottery is run in isolation with a Cryptography system and no one knows who the committee members are, you only know if you're a member by winning the lottery.

This committee formed becomes the basis for which the block initially formed is validated.

By doing this problem of Decentralization is formed since no one is in charge of who wins the lottery, and only those who win can make opinions about the block.

All of this is random because the next block will also have another set of committee.

Also security is assured since no one knows who the committee members are until they show their opinion on the new block and at this time it is too late to influence any of them.

Committee members also do not know results and until the lottery ends you do not know if you're a member yet because the lottery is run randomly.

Problem of scalability is solved as lottery is happening at the same time and we do not have to wait for one lottery result independent of another.

By doing this the Blockchain Trilemma can be solved, but Algorand solution is based on the network being run like a society where honest users are always more than the dishonest ones.

•Second Layer Solutions
This technology unlike the first one solves the problem by tackling them separately.

This deals with the problem by sharing with other channels. By doing this problem can be solved independently and improving speed of transactions as it is instantaneous.

Blockchains such as that of the Bitcoin which has scalability problems are embracing this method in dealing with the blockchain Trilemma.

CONCLUSION

The Trilemma apart from being a problem faced in Blockchain technology also cuts across many areas and it is a breathe of relief knowing that solutions are already in the works.

Prior to this lecture i had no idea of the trilemma concept of that it even relates to the blockchain technology.

Your introduction of this topic professor @nane15 is very much appreciated as I look forward to your review of my work.