Blockchain Scalability

The advent of blockchain technology has resulted in a wide array of blockchain applications in a variety of different industry sectors worldwide. Blockchain growth continues to march forward exponentially offering numerous innovative and limitless solutions. However, this does not come without its challenges, as the many blockchains continue to grow and expand. This in turn is coupled with the enormous growth in users and subsequently results in scalability issues, and transaction latency problems.

Scalability in this context can be defined as the platform or system’s ability to manage and support an increasing amount or quantity of tasks, namely an increasing amount of transactions together with an increasing amount of nodes in the network. Generally, blockchain networks suffer from low scalability. In the blockchain world, this mostly refers to the transaction throughput, bootstrap time, latency, and even the cost of the actual transaction. As is well known, the costs when executing crypto transactions can vary greatly with certain networks, however, from a high-level perspective these costs can be attributed to various factors, including the frequency and processing of large quantities of transactions. A blockchain network can be classed as scalable when it is able to adequately handle a high volume of transactions per second (TPS), usually by the adjustment of certain system characteristics such as its consensus mechanism.

As growth in blockchain networks continues to increase exponentially, this naturally results in an ever-increasing number of nodes within the blockchain networks. This in turn raises the issue of scalability. This tends to result in the transaction processing slowing down, and often increases the transaction costs, whilst restricting additional users from joining the network. As the number of nodes increases, this subsequently results in an increase in transaction times, as it takes longer to process the transactions and reach consensus. Hence, this causes degradation of the overall performance.

Probably one of the best comparisons to make here to highlight the scalability issues would be to consider the number of transactions processed in the Bitcoin network, which currently runs to around 7 transactions per second. If we compare this to the well-known Visa card processing system, the number of transactions processed every second is around 17,000.

Various factors define blockchain scalability, and generally speaking these consist of networking, capacity, and throughput. With regard to networking, every type of transaction that occurs is transmitted to all nodes residing in the network. This can consume a vast amount of network resources coupled with increasing propagation delays. Secondly, the capacity and cost also factor into this equation, as storing large quantities of data is a key requirement here.

As mentioned above, in order to achieve scalability there are various challenges to be overcome. To highlight these problems often regarded as bottlenecks, it is evident that the main issues consist of the following points:

This is one of the key issues with regard to scalability, as the block size significantly impacts the network capacity and speed. There is a size limit for each block created which is known as the block limit. As we have previously learned, blocks contain both actual data together with the transaction data. For example, Bitcoin has a block limit of 1Mb. The logic behind setting this limit was to prevent the miners from creating blocks that would be considered too large for other miners to accept. However, limiting the block size results in reducing the transaction speed. This in turn limits the speed of transactions being validated, hence slowing down the entire process in the blockchain network. In addition, increasing the block size also has an impact, as this requires an increase in the node’s storage capacity. Furthermore, if a node is required to upload a substantially large block into the network, this can cause delays in processing the transfer and could cause a loss of synchronization resulting in temporary chain splits.

As in all blockchain networks, each transaction has to be validated as described on the How blockchain works page. Naturally, as the transaction volumes increase, this, in turn, increases the load on the network, and transactions are queued, which subsequently slows the process down. In addition, this can also result in transaction fees increasing.

The TPS (transactions per second), rates are directly related to the response times as described above, as managing the load and transaction speeds are intertwined, hence, these are two of the key challenges to be overcome. However, in the Lisk ecosystem, the TPS is actually improved due to the Lisk interoperability solution. This is covered further in the Scalability in Lisk section below.

As the blockchain grows more and more transactions have to be processed. Therefore it is important to take into account the increasing block sizes, as this can result in overloading the network. In addition, this can also be further compounded by the existing hardware limitations of many of the nodes, whereby they are simply unable to handle the vast quantities of data and bandwidth requirements.

As the scalability issue is always at the forefront of efficiently managing blockchain networks, it is important to familiarize ourselves with the key issues here. This can be characterized by referring to the blockchain network’s ability to handle the continuing growth, ensuring the security is not compromised in any way, shape, or form, whilst continuing to maintain the node synchronization, transparency, and fairness together in a fully functional decentralized network. Ultimately, achieving this results in a trade-off, as depicted in the scalability trilemma diagram below.

The scaling trilemma is classed as somewhat of a loose concept, implying that there is a trade-off between these three key components here, namely decentralization, security, and scalability. Therefore, it is always a challenge to maximize the other two components without compromising the third, as can be seen in the following diagram below. In this hypothetical example, if we were to improve scalability this requires compromising on decentralization and security. However, it should be noted that as decentralization is a constant, a proportional relationship between scalability and security exists. Hence, it is evident that a blockchain network is unable to optimize scalability, decentralization, and security simultaneously. As a result, we have to accept trade-offs.

There are various methods that can be used to address the blockchain scalability problem, such as layer 1 and layer 2 solutions, scalable consensus methods, and DAGs (Directed Acyclic Graph). These are covered in more detail in this section.

Lisk is currently well-placed in this regard, firstly by its interoperability solution that allows each application to run on its own sidechain. By deploying the cross-chain certification methodology, this results in an efficient and scalable solution for transferring information between chains. In effect, being able to run each application on a separate sidechain results in significantly increasing scalability. For further information, see the cross-chain communication page.

Secondly, scalability is further increased by the use of the PoS consensus mechanism as explained in more detail on the How blockchain works page. Basically, PoS is a much more efficient consensus mechanism from a network scalability viewpoint as compared to PoW. In addition, PoS does not demand vast power requirements either. Furthermore, Lisk deploys deterministic block processing which in turn increases scalability further. PoS also possesses further key benefits of being a highly decentralized and efficient consensus mechanism, coupled with having fast transactions, faster node restart times, reduced block production times, and a high level of security, ensuring it is well placed for any Web3-based projects. In addition, a limited amount of block processors are chosen based on their stake in the blockchain, making the throughput much greater and faster.

Furthermore, with Lisk SDK v6 an additional consensus mechanism, Proof of Authority, (PoA) will also be supported, therefore the user will be able to choose between PoA and PoS. With PoA no consensus tokens are required, therefore it is possible to deploy a PoA sidechain that solely uses the Lisk token. This results in increasing the node’s performance, resulting in a more simple and efficient system as it requires fewer message exchanges and less overhead. Finally, resulting in an additional positive effect on scaling for the Lisk ecosystem. Further information can be found here in the following Lisk blog post: PoA Consensus for Sidechains.

To summarise, Lisk is well positioned in this regard, as having the ability to be able to run applications independently on separate sidechains, results in reducing the load on the mainchain, therefore increasing the overall scalability of the network. Furthermore, by offering the user the choice of either being able to use the efficient PoS consensus mechanism or the more simplified PoA consensus mechanism, now introduced with the Lisk SDK v6, also enables scalability to be effectively increased.

To conclude this section, the ongoing quest continues to further enhance and improve scalability, which remains constantly in the spotlight. Therefore, it is predicted that achieving ultimate scalability on all fronts will require a combination of many different solutions. Research and development towards new approaches are ongoing, and currently, constitutive scalability solutions are being studied, which do not require additional layers, whereby the immutability for all transactions is certified within the constitutive protocol itself. Therefore, it is inevitable that further improvements in blockchain scalability will come to fruition in the near future.