Crypto Academy Week 15 - Homework Post for @alphafx

Introduction

Scalability, in terms of blockchain and cryptocurrencies, is defined as the number of transactions per second that can be processed in a blockchain. It is one of the problems that cryptocurrencies face, and is a major reason why it cannot replace the regular finance system.

Transaction with Binance Smart Chain

I made a transaction with BNB from a Binance Exchange wallet to Trust Wallet. The details are below:

• I sent 0.032BNB from my exchange wallet to my Trust Wallet The BNB left the Binance wallet by 16:11:28pm.
  

  

• The transfer was almost immediate. I checked my trust wallet account and found that I had received the BNB in no time. I refreshed the wallet but could not get any details about the transaction.
  

  

• As a result of this, I went to Binance Scan to view the details of the transaction.
  

  

The transaction was shown to be completed at 3:12:53pm UTC. My time zone is WAT (West African Time) and it is an hour ahead of the UTC time zone. This implies that the transaction was completed by 4:12:53pm local time.

From the illustration, it took 1 minute 25 seconds for the transaction to be completed. The transaction is almost instantaneous. I can conclude that Binance Smart Chain has a fast transaction speed.

Transaction with Tron

• I made a transfer of 1 TRX from my TronLink Wallet to my Trust Wallet. The TRX left my wallet by exactly 13:55:33 local time.
  

  

• I opened my Trust Wallet. It shows that I had received the TRX, but no transaction details were displayed.
  

  

• Inorder to view the transaction details for the receiving amount, I opened Tronscan.
  

The illustration above shows that the transaction was completed at 13:55:33. This implies that the time it took for the TRX to leave my TronLink Wallet and get to my Trust Wallet was less than a second (<1 second).

Comparison between the Speed and Scalability of Tron and Binance Smart Chain to that of Bitcoin

From my illustration, it is clear that Tron and Binance Smart Chain both have lower transaction time and a better scalability than Bitcoin. My illustration recorded <1 second for transaction on the Tron Network, and 1¼ minutes on the Binance Smart Chain.

Tron can handle an approximate of 2000 transactions per second. This is a very large gap compared to Bitcoin's 5 transactions per second.

The Tron network uses bandwidths and energy as resources to approve smart contracts. The network offers a free fixed supply of 5000 bandwidth every 24hours. The bandwidth amount can be increased by freezing TRX. The network does not supply free energy. As a result of this, TRX needs to be frozen to obtain energy for approval of smart contracts. If this isn't done, TRX would be burnt to supply energy. This is different for Bitcoin where an individual has to pay higher fees in order to stand a better chance of his transaction being completed early, although this isn't always the case.

This constitutes to making transactions in the Tron network fast compared to other cryptocurrencies like Bitcoin. But this wasn't always the case. Tron started out as an ERC-20 project before the development of the TVM (Tron Virtual Machine). The TVM is responsible for handling smart contracts in the Tron network in a seamless fashion.

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On the other hand, the Binance Smart Chain also has better scalability in comparison to that of Bitcoin. This is because Binance owns the title of the largest centralized cryptocurrency exchange there is.

The centralized nature of the exchange entails that there are mechanisms that are set up inorder to control transactions, making it as swift as it could be. These validators confirm blocks by staking BNB inorder to facilitate the running of the network. It works in a similar manner as the management of conventional financial systems, notwithstanding the fact that it uses a PoS system.

Compared to Tron Network's transfer time of 3 seconds¹ and Binance Smart Chain transfer time of 3 seconds,² Bitcoin's transaction time of 10 minutes is a huge lapse in its system.

Improving the Scalability of Bitcoin, Tron and Binance Smart Chain

1) Use of Off-Chain Channels:

Scalability in Bitcoin can by improved with the use of Off-Chain Channels. This is the creation of direct links for the purpose of making transactions. Transactions are made outside of the blockchain using this method. The details and results of the transactions are later sent to the blockchain and the transaction recorded. This method also helps in reducing the load of transactions in blocks, thereby improving validation speed in the blockchain
Lightning network offers this for the Bitcoin network. This method can be used to improve the Tron network too. By creating direct connection for transactions, the transaction per time would be improved, as well as the bandwidth and energy that is used for authenticating smart contracts.

2) Sharding:

This is the process of splitting a database into fragments inorder to decongest a network. It is suitable for reducing scalability in the Ethereum blockchain. Each fragment has a validator that is in charge its data. As a result of this, validators only authenticate the fragments that they are in charge of. This would improve the overall transaction per time of the blockchain.

3) Decentralization of the Binance Smart Chain Network

The Binance Exchange has proven itself as a centralized exchange. The scalability of the Binance Smart Chain is better than that of several other cryptocurrencies. But if this network is decentalized, it'll even be more advantageous. A minor (or major) error in the central system of the network would affect the entirety of the network. In this same context, minor flaws in the central system can affect the scalability of the network. Decentralization of Binance would protect it from the dangers that come with system attack or failure which would affect scalability.

Conclusion

Scalability is very important for cryptocurrencies. If this is not improved, digital currency would always be lagging in the financial world.

No technology was created without setbacks. As time goes by, these setbacks are gradually curbed. Scalability would improve over time, giving the world of cryptocurrency a push into the future.

Special thanks to @alphafx