Understanding the trilemma problem of Practical Blockchain

The Dilemma of Three Characteristics

There are unavoidable challenges in promoting the global adoption of blockchain technology. These include the difficulty of simultaneously achieving a balance among the three fundamental characteristics of security, decentralization, and scalability. This is referred to as the so-called trilemma, which points to a structural contradiction where strengthening one characteristic inevitably weakens another.

In order for blockchain to truly function, it is necessary to significantly increase the number of transactions per second (TPS) that the network can process. However, many current public blockchains tend to experience a decline in decentralization and security when attempting to enhance scalability. Various technical approaches are being attempted across the industry to address this fundamental dilemma.

The Essence of Decentralized Networks

Blockchain is, in simple terms, a distributed digital database. Data blocks are organized in chronological order and are linked through cryptographic proofs.

The biggest advantage of decentralization is that it eliminates central control by specific companies or individuals. All participants in the network have access to the same ledger, allowing for collective verification and prevention of tampering with transaction records. The reason Bitcoin can achieve a payment system that does not require a central bank is precisely because of this decentralization.

However, since a large number of participants need to reach consensus, the processing speed is slower compared to centralized systems. This becomes a constraint on scalability and is one of the root causes of the trilemma.

Trade-off between Security Assurance and Processing Speed

The security of blockchain is achieved through a combination of cryptographic techniques and consensus mechanisms. In Bitcoin's Proof of Work (PoW), miners validate transactions by solving complex mathematical calculations. This computationally intensive mechanism significantly raises the cost of attacks on the network, ensuring security.

However, this security design limits Bitcoin's processing capacity to about 5 TPS. On the other hand, Ethereum's base layer is also limited to about 18 TPS. Breaking through these limitations while maintaining security and decentralization is key to solving the trilemma.

Theoretically, if a single entity controls more than half of the network's computational power, a 51% attack becomes possible, leading to the increased likelihood of fraud such as double spending. To prevent this, sufficient decentralization is necessary; however, the more decentralized it becomes, the longer it takes to form consensus, resulting in a vicious cycle that decreases scalability.

Current Status and Challenges of Scalability

Centralized payment systems like Visa can process thousands of transactions per second. This is possible because a small number of nodes make decisions in a closed, permissioned environment.

In contrast, public blockchains require all validators to verify transactions. This decentralized verification process is secure, but it significantly limits processing capacity. If network usage increases without considering scalability, congestion and rising transaction fees are unavoidable.

The transition to Proof of Stake (PoS) may provide some partial improvements, but it still requires consensus from distributed nodes around the world and does not constitute a fundamental solution.

A Multidimensional Approach to Solving the Trilemma

The industry is pursuing multiple technical approaches in parallel, some of which are actually yielding promising results.

load balancing through sharding

Sharding is a mechanism that divides the blockchain into multiple independent partitions (shards), each processing transactions in parallel. In the NEAR protocol's Nightshade 2.0 model, multiple parallel shards dynamically scale the network, achieving eight active shards operational by 2025 and approximately 600 milliseconds of transaction finality.

Adoption of various consensus mechanisms

Efforts are underway to adjust the balance of the trilemma's characteristics through different consensus designs. In PoS, anyone can become a validator simply by staking tokens, which lowers the barriers to participation and increases decentralization.

Proof of Authority (PoA) is a method that prioritizes scalability by concentrating authority in trusted validators. The BNB Smart Chain adopts Proof of Staked Authority (PoSA), which combines elements of PoS and PoA, achieving a balanced design. The Conflux network attempts a different approach by combining elements of Proof of Work with a Directed Acyclic Graph (DAG) structure.

Layer 2 gradual scaling

The most practical short-term solution is Layer 2 solutions. Instead of changing the main chain, it processes transactions off-chain by building on top of it.

Rollup technology compresses multiple transactions and sends them to the main chain as a single proof. Optimistic rollups like Arbitrum and Scroll achieve speed while retaining all transaction details, while zero-knowledge rollups verify validity with cryptographic proofs. Ethereum is evolving towards a rollup-centric architecture, significantly enhancing the scalability of the DeFi ecosystem.

State channels are a mechanism that records only the states at the beginning and end of a transaction on the blockchain, allowing participants to conduct transactions freely off-chain. Bitcoin's Lightning Network adopts this approach, achieving fast and low-cost settlements by offloading most of the processes off-chain while performing the final settlement on the base layer.

Possibility of Resolving the Trilemma and Future Vision

Currently, there is no blockchain that has completely “solved” the trilemma. However, Ethereum's rollup-centric roadmap and emerging high-performance modular blockchains show a practical path forward.

These technological innovations are bringing us closer to improving scalability without compromising security and decentralization, heralding an era where global-scale application operations will be realized on the blockchain.