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Blockchain has become a hub for modern technology, with a surge in interest and the search for distributed ledger solutions. Decentralized distributed ledger technology aims to enable distributed transaction management. Therefore, each node can have the privilege of initiating a transaction according to certain rules without the need for a third party to manage the transaction. With the spread of blockchain, blockchain-based applications are now a part of our daily lives. As the number of users of blockchain is on the rise increases and scalability issues are coming to the forefront in crypto literature. Whether you are reading this as a blockchain developer or a customer-focused entrepreneur, you will learn a lot from reading this article anyway. Our points in this article offer detailed insights into the various possible solutions for addressing blockchain scalability issues.
Scalability means the extent to which a computer system (such as a database or search engine) can handle an increasing amount of work. Blockchain networks cannot be effectively scaled or are less scalable with large amounts of data. The blockchain lacks sufficient effort to modify the system to handle the increasing workload, data, and resources (processing power, servers, bandwidth, etc.). However, the term "scalability" has a much more diverse meaning in the context of blockchain. Surprisingly, the word "blockchain" is not completely defined academically. In one of the most popular articles on blockchain scalability, for example, Bitcoin improvements in throughput, latency, bootstrap time, or cost per transaction are called "scaling" and the resulting state of the network was called scalable. Although the throughput varies greatly, some blockchain systems can be considered "scalable". Keep in mind that the term "scalable" is a comparative term within the blockchain. When a blockchain system is said to be scalable, it achieves greater TPS than other blockchains by optimizing its consensus method and adjusting certain system properties.
Public blockchain inefficiencies in scaling data volumes attest to the need for optimal scalability solutions for different industries that use blockchain. For centralized systems, there are third parties that charge huge transaction fees to execute transactions. These third parties provide integrated monitoring and control of all stakeholder data and online transactions. Unlike centralized systems, a blockchain is an immutable ledger that manages cryptographically signed transactions on a distributed network. Blockchain prevents third-party intervention, ensuring transaction security and eliminating third-party costs. Since most blockchains have predefined rules hardcoded to inform how they operate, scalability problems often arise when the number of transactions initiated by users is more than what the network can handle at a time. Users and developers alike often refer to popular blockchain networks like Bitcoin and Ethereum when they talk about scalability issues related to data computation. Therefore, to address the problem of poor scalability, public blockchain platforms require processing power, high-speed internet connectivity, and good on-chain storage. Latency and transaction throughput are two basic factors that affect the blockchain. In the next section, learn about the importance of blockchain scalability.
Scalability deals with the ability of a network to improve transaction throughput and is an important criterion for blockchain networks. Blockchain scalability is about the network's ability to handle high transaction throughput and is the basic criterion for minimizing network downtime. Increasing use cases and the adoption of blockchain technology will not affect the performance of highly scalable blockchain. Blockchains with poor performance often fail during periods of congestion because the network cannot process large amounts of data and is to a great extent unscalable. The inability to process large transactions or performance below network demands makes for an unscalable blockchain. Scalability is therefore super important for the future of blockchain technology. In addition, the blockchain trilemma argument suggests that achieving increased scalability comes at the cost of reduced security or decentralization. Again, it is crucial to remember that only scalability can allow blockchain networks to successfully compete with traditional centralized platforms like Visa which has the capacity to process thousands of transactions per second.
Since scalability is one of the main barriers to mainstream blockchain adoption, finding solutions to the scalability issues was only normal. Currently, there are various types of solutions under development to address blockchain scalability issues. Interestingly, solutions to blockchain scalability issues come in four different categories. Each solution category offers its own suggestions for solving blockchain scalability challenges.
The main answer to "How to fix blockchain scalability issues" leads to a Layer 1 solution. In the first layer or layer 1 solution, you need to change the code base of the main blockchain network. Therefore, Layer 1 solutions are also known as on-chain scaling solutions. Layer 1 solutions focus on the core blockchain network features and enhancements that increase the block size limit or reduce the block validation time. Scalability solutions on Layer 1 blockchains include sharding, segregation witness (SEGWIT), and hard forks.
Sharding is one of the most notable on-chain scaling solutions. Its objective is to break down the network into smaller, more manageable parts called shards. Each sharded transaction in the group greatly increases the processing power of the entire network. If you divide your network into smaller parts, the network can act as a sum of those parts. Sharding basically eliminates the speed-dependent concerns of individual nodes in order to speed up and improve transaction throughput.
Segregated Witness or Segwit is also a notable addition to the blockchain scalability solution of the first-tier solution. Segwit is basically an improvement in the Bitcoin blockchain network protocol that focuses on data storage methods and structural changes. This helps remove the signature data associated with each transaction, thereby opening up more space and space to store the transaction. It would interest lots of readers to know that the digital signature used to verify the ownership and availability of the sender's funds occupies approximately 70% of the total transaction space. Removing the digital signature may free up more space for adding transactions.
Hard Fork is a process focused on making structural or fundamental changes to the properties of a blockchain network. For example, a hard fork means increasing the block size or reducing the time required to create a block. Hard forks are a requirement of layer 1 blockchain scalability solutions, but it remains controversial whether hard forks are the most productive option. The problematic hard fork essentially points to a larger blockchain network split, with certain sections of the community disagreeing with the core community on a particular issue. In such cases, a subset of the blockchain community can choose to make basic changes to the underlying source and fork to form a separate chain. Examples of successful hard forks are Ethereum Classic and Bitcoin Cash.
The feasibility of a first-layer or on-chain scaling solution is highly dependent on changes in the main blockchain network. However, research to find answers to fix blockchain network scalability issues has led to the development of off-chain scaling solutions. Off-chain scaling solutions are tier 2 or tier 2 scalability solutions. The second-tier solution is basically a secondary protocol developed on the main blockchain. The secondary protocol is where you "offload" transactions from the main blockchain. As a result, Layer 2 solutions can be of great help in addressing disk capacity and network congestion issues. Typical examples of second-tier solutions are presented in the form of status channels and offside chains.
State Channel is one of the usual additions to Layer 2 blockchain scalability solutions. State channels provide two-way communication between off-chain transaction channels and blockchain networks through a variety of mechanisms. As a result, transaction speed and capacity can be increased productively. It is important to note that government channels do not require the immediate involvement of miners to verify transactions. On the contrary, government channels act as network-like resources integrated using smart contracts or multi-signature mechanisms. When a transaction or group of transactions completes on a state channel, the associated blockchain documents the final "state" of the "channel" along with the associated transitions. Notable examples of government channels as blockchain scalability solutions include Ethereum's Raiden Network, Liquid Network, Bitcoin Lightning, and Seller. However, government channels exchange some decentralization to improve scalability.
Sidechain is also one of the best choices in Layer 2 solutions to find a way to fix the scalability issues of the blockchain of your choice. The sidechain actually acts as a chain of transactions alongside the blockchain, especially for large batch transactions. The sidechain uses an independent consensus algorithm compared to the original chain. Interestingly, the independent consensus mechanism provides an opportunity for optimization to achieve increased scalability and speed. Sidechains typically use utility tokens as a mechanism for transferring data between the sidechain and the mainchain. In this case, the key role of the mainchain is to focus on maintaining overall security in addition to facilitating dispute resolution. The sidechain can be clearly separated from the state channel in different ways. Please note that sidechain transactions are not worth the privacy between participants as they are published in the ledger. In addition, sidechain security breaches do not affect the mainchain or other sidechains. Although, setting up a sidechain can be quite labor-intensive as you have to work from the beginning.
Plasma remains one of the popular blockchain scalability solutions in the Layer 2 Scaling solutions category. It basically focuses on the use of subchains that originate from the original blockchain, with each subchain acting as an independent blockchain. The subchain handles its own transactions while leveraging the security of the associated mainchain. Operating each child chain in parallel and independently provides an ideal opportunity to optimize speed and efficiency. In addition, subchains have specific properties and rules. This allows you to create Plasma for use cases that handle specific categories of transactions while running in a similar ecosystem with higher security.
Lightning Network is a notable example of an off-chain solution for blockchain scalability. The focus is on leveraging smart contract capabilities on the main blockchain network of off-chain private channels. Off-chain channels can offer faster transactions at capped rates. Most importantly, Lightning Network can offload the main blockchain by shifting transactions from the mainchain. As a result, users no longer have to process mining fees or wait for block confirmation.
Several consensus methods are available that are designed to streamline consensus building. As a result, scalable consensus algorithms improve scalability and transaction throughput. Below are some important examples of a scalable consensus process that acts as an effective blockchain scalability method.
Delegated Proof of Stake or DPoS refers to a consensus mechanism similar to the democratic process of running a country. In this case, the token holder can select a validator for transactions on the network. The number of delegated validators ranges from 10 to 100 depending on the system and is subject to change on a regular basis. Token holders can easily vote for poorly performing validators and malicious validators for their systems. Therefore, DPoS acts as a collaborative consensus mechanism compared to competing mechanisms such as proof-of-work and proof-of-take. In the case of DPoS, the representative is responsible for working together to ensure the creation of the block. Despite the partial centralization of DPoS, the speed of DPoS blockchain networks is superior to traditional public blockchain networks.
You can also choose certification as another productive entry for your blockchain scalability solution. This is a scalable consensus mechanism that actually provides a reputation-based consensus algorithm. The selected node is responsible for validating transactions on the network using the credential consensus mechanism. The node acts as a system administrator with the ability to indicate the status of transactions on the blockchain. Credential-based blockchain systems require participants to bet their ID. Therefore, the authorization mechanism implies the need for a comprehensive and rigorous screening process for selecting validators. The identity-based model and higher authorization throughput make it suitable for authorized private blockchain systems.
The Byzantine Fault Tolerance or BFT Consensus Mechanism was one of the proven tools for solving the Byzantine Generals' problem. BFT basically shows the characteristics of a distributed system. This means that despite a large number of hostile agents in the network, consensus must always be reached. Many variations of the Byzantine fault tolerance algorithm can be found as useful solutions for blockchain scalability. Three different variants of the BFT consensus mechanism include practical BFTs, federated BFTs, and delegated BFTs.
Practical BFTs basically provide a powerful variant of the Byzantine fault tolerance algorithm. A large amount of computation can be supported with only a slight improvement in latency. It basically acts as an asynchronous system where the primary nodes always communicate with each other along with the backup node. Basically, a practical BFT provides a high-performance variant of the Byzantine fault tolerance algorithm. A large amount of computation can be supported with only a slight improvement in latency. It basically acts as an asynchronous system where the primary nodes always communicate with each other along with the backup node.
Federated BFT or Federated Byzantine Agreement (FBA) basically refers to quorum slices and BFT variants that emphasize reaching consensus through quorum. Quorum indicates the number of nodes required to reach consensus in the system. Second, the quorum contains a collection of quorum slices consisting of three or more nodes. Another interesting feature of the FBA is related to the accuracy and updating of public ledgers for non-majority transactions. In contrast, the FBA focuses on defining quorum by individually selecting all the nodes associated with the quorum slice.
Delegated BFT or DBFT is also one of the most prolific blockchain scalability solutions with many real implementations. DBFT is basically a BFT flavor that focuses on splitting a node into two different formats. These formats are the regular and the accounting nodes, also known as delegates. The DBFT consensus mechanism works like a country's democratic process. Token holders and regular nodes can vote for randomly selected agents to validate and validate transactions.
At Rejolut we have specialized and experienced developers and blockchain experts that use agile techniques for blockchain software development and provide robust scalability solutions to reduce blockchain latency. The ever-increasing demand for blockchain applications is causing significant scalability issues. More users and more transactions can overload the blockchain network and limit its ability to process transactions. While there are many factors that can affect blockchain scalability we understand not everyone may want to deal with the complexities involved. As a blockchain development company, we provide a wide variety of blockchain scalability solutions. We will help you by using different types of blockchain scaling solutions in different categories, such as Layer 1 solutions, Layer 2 solutions, scalable consensus mechanisms, and DAGs. As a solution-focused blockchain development firm, we offer reliable and long-term services that set networks up for success.
Increasing demand for blockchain applications creates significant scalability challenges. More participants and transactions can block the blockchain network and limit its ability to execute transactions. While some potential factors impede blockchain scalability, a wide range of blockchain scalability solutions can offer breathtaking relief. Blockchain scaling solutions come in a variety of formats, including Technologies such as Layer 1 and Layer 2 solutions, scalable consensus mechanisms, and DAG which provide effective answers to blockchain scalability challenges. With expertise and experienced developers, our blockchain development services combine agile techniques for software development to provide robust scalability solutions to reduce blockchain latency.
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