Let’s delve into the Blockchain Trilemma and its solution. In early January 2022, the Bank of America made an extraordinary remark. It described Solana as the “Visa of the digital asset ecosystem.” Solana blockchain is, in theory, the fastest blockchain in the sector. It boasts a 50,000 transaction per second (TPS) speed, and its ‘gas fees’ are as low as $0.00025 per transaction.
In contrast, the Ethereum network has a 15 TPS speed. Its network’s gas fees average $1.8 as per ycharts data. These charges could rise to a $20 to $70 per transaction range as they did on May 21 due to a rapid increase in decentralized finance (DeFi) and NFT activity.
An ultra-volatile transaction pricing mechanism has poor outcomes for Ethereum network transactions. For example, about 5% of transactions on the smart contract network fail due to complications such as insufficient “gas” or gas fee slippage.
As an illustration, Uniswap, Ethereum’s leading decentralized exchange user, had over 100,000 failed transactions in a week in December 2021. As high as this figure is, it was 6% down from the DEX former failed transactions high rate of 11%.
The Ethereum ecosystem’s decentralized applications languish under inefficiencies such as botched transactions, failed transactions, and front running. Ethereum’s mining nodes also use the Miner-Extractable Value loophole to siphon value from its unwitting users.
MEV is disadvantageous to users who only find out that their transactions incur more fees due to slippage.
The blockchain scalability challenge
The Solana network’s merit over Ethereum is its high throughput. It is the blockchain world’s Visa equivalent because it processes the highest number of transactions of all blockchains at ultra-fast speeds.
The Bitcoin node network has validated 700 million transactions since its humble 2009 beginnings. On the other hand, the Ethereum node network has finalized 1.4 billion transactions since 2015. Solana launched in 2020 and is a young third-generation blockchain network. Its nodes have processed over 69 billion transactions on its nascent network.
It is easy to see why most pundits believe Solana is a plausible ‘Ethereum killer’. Solana could easily flip Ethereum and become the to-go-to-smart contract network for decentralized application development.
Its highly scalable network could potentially support a global transaction network since it is higher than that of Visa. For example, the Visa network can process 24,000 transactions per second. But the Solana network may not be the Ethereum killer that many envision it to be because, like Ethereum, it is subject to the blockchain trilemma.
To illustrate this point, on September 14, 2021, Solana had what its foundation described as a “denial of service attack .”After weeks of SOL value acquisition, the fastest blockchain network hit a massive roadblock.
It went offline, plunging its users into darkness for 17 hours. The root cause of the network outage was a flood of transactions emanating from an IDO or initial decentralized exchange (DEX) offering. Grape Protocol users had swamped Solana data validation nodes with a rapid stream of transactions, overloading their systems.
Solana had to halt block production when some of the nodes crashed. It could no longer ascertain consensus over the network’s status, placing its security at risk. Hours after the outage, the Solana Foundation brought together 80% of its validators to affect a network restart effort.
On January 20, 2022, the network again came under the spotlight when congestion led to another outage. Binance, the world’s largest exchange, had to halt Solana-based crypto withdrawals since Solana nodes could not ascertain consensus.
The blockchain trilemma
Decentralized protocols are disruptive and will have profound benefits for the business sector. But they are ahead of their time. For this reason, most blockchain networks’ capabilities are theoretical. Developers have a difficult time turning that theory into practice.
This complexity arises from the three fundamental qualities of a blockchain network; decentralization, scalability, and security. Unfortunately, these three features are extremely difficult to achieve, creating the blockchain trilemma.
What is the blockchain trilemma?
Vitalik Buterin, Ethereum’s co-founder, coined ‘blockchain trilemma’ to describe the delicate balance between the three fundamental attributes of blockchain technology.
Blockchain developers have not come up with one unique solution that does not sacrifice one of these fundamental features for the sake of the other two when setting up blockchain networks.
A secure blockchain is highly resistant to risks such as 51% attacks. Bitcoin and Ethereum are, for instance, secure but less scalable. This effect occurs because scalability and security are opposite poles working against each other in decentralized protocols. Security will keep a network stable by trading off scalability. That said, security is fundamental to decentralization, and in its absence, malicious actors would bring down a network.
Decentralization and scalability
Blockchain networks such as Solana have low decentralization metrics but good scalability features. For example, Solana has 1000 validator nodes while Ethereum has 6,155 nodes on its peer-to-peer network. A vast dispersed network of active networks keeps blockchain networks free of central entities.
Decentralization is why blockchain is a technological revolution, and Ethereum 2.0 embraces features such as Proof of Stake (PoS), side chains, and sharding.
First, sharding will break down the network’s transaction into manageable data sets that ease and speed up processing. Consequently, Ethereum will process more transactions without falling prey to congestion and endangering its data decentralization and security metrics like Solana has.
Ethereum 2.0 could have speeds as high as 100,000 transactions per second. But, then, centralized networks such as Facebook can host 2.91 billion active users each month. In contrast, Ethereum has an average of a million active addresses on its network every day.
Decentralized networks cannot support global networks till they are scalable and can support high workloads. Fortunately, Ethereum is adopting a Proof-of-Stake (PoS) consensus mechanism that does away with the slow block data mining process that characterizes Proof of Work networks.
PoS will increase Ethereum’s network capacity. On top of that, Layer 2 solutions such as Bitcoin’s Lightning Network improve transaction speeds and scalability. Other Layer 2 solutions include side chains, state channels, and nested blockchains.