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Solving the Scalability Trilemma: Collaborative Blockchains in 2019

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What matters in a consensus mechanism? Today, several blockchain companies are competing to prove they are the best. But what does that mean?

The bulk of crypto companies have touted speed and efficiency as their claim to success, but there is much more to the equation. Scalability, in the form of speed and efficiency, often comes at a cost to security and decentralization.

Vitalik Buterin has branded this issue the scalability trilemma. “Blockchain systems have to tradeoff between different properties,” he says. “And it’s very hard for them to have three things at the same time, where one of them is decentralization. The other is scalability, and the third is security.”

SIMETRI Research

What if blockchains stopped focusing on a one-size-fits-all solution? What if developers created a system that could host a variety of proofs tailor-fit to specific industries? Could different proofs collaborate to create optimal balance?


One Size Doesn’t Fit All

Proof-of-Work (PoW) was the first blockchain consensus protocol, but that doesn’t mean it’s the best or only consensus system. Satoshi designed Bitcoin to solve a very specific problem – decentralized peer-to-peer transactions based on cryptographic proof instead of trust.

Crypto is no longer just a system for financial settlement. Now, with the introduction of smart contracts, blockchains can resolve trust for a variety of digital transactions.

Virtual machines and smart contracts are helping developers rearchitect things like medical records, legal documents, shipping logistics, computer logic and network access. Through platforms like Ethereum, applications can host backend processes in the blockchain and create intricate networks of automation.

But the intricate processes and more complicated ledgers place greater strain on PoW networks. As a result, developers have architected new proofs like Proof-of-Stake (PoS), delegated Proof-of-Stake (DPoS), Proof-of-Authority (PoA), Proof-of-Space (PoSpace), Proof-of Replication (PoR), Proof-of-Capacity (PoC), etc., to balance the network demand and create specialized blockchains.

These adaptations operate with different ratios of security, speed and decentralization. And although many newer blockchains/platforms have proclaimed themselves the next Bitcoin, Ethereum, EOS, or XRP, none qualify as the undisputed best solution for all things decentralized.

In truth, the more businesses and developers explore blockchain technology, the more they realize the futility of a one-size-fits-all blockchain. Today, more companies and experts are counting on a multi-blockchain future. Venture capital and technology giants are diversifying their investments in blockchain development and creating agnostic APIs to support applications on a number of blockchain platforms.


Finding the Best Proofs

Developers are stepping back from the general blockchain applications to look at specific problems across industry verticals. They need platforms with exact and customizable consensus parameters, leading many platform providers to offer managed blockchains or Blockchain-as-a-Service (BaaS). Companies want easy ways to deploy or co-opt custom blockchains to suit their applications.

Some Questions for Developers are:

  • What problem are you trying to solve with blockchain and why?
  • What is the most economical way to solve this problem with current solutions?
  • How might blockchain improve this?

Depending on what issue a developer is trying to solve, they require different consensus mechanisms. For example, a developer creating an art validator blockchain may require PoA consensus and use oracles (labeled experts) to determine a works’ authenticity. This method would be less decentralized but more efficient. For a file storage blockchain, a developer would probably need a combination of PoSpace, PoR and PoC, a consensus system that would be slower, but more secure and decentralized.


Opportunity for Layered Blockchains and Hybrid Deployments

What does this have to do the scalability trilemma?

Customized blockchains and different consensus mechanisms help developers construct tradeoffs between scalability, security and decentralization. But there is still isn’t a single blockchain or proof that maximizes all three features.

Enter layered blockchains, the next likely step for crypto in 2019. No, there isn’t one blockchain or consensus system that can, on its own, solve the scalability trilemma. However, what if developers combine consensus and blockchains through cross-chain collaboration and hybrid deployments?

This shared epiphany has sparked many next-gen blockchain companies to design collaborative and consensus agnostic systems. The idea is to use a stable and scalable PoW core but create splinter MicroChains that can adopt a number of alternative proof systems.

In this model, a developer could run a less decentralized but more scalable PoS blockchain that periodically flushes its data into the immutable and secure PoW core. The application layer would run with the desired scalability, but also retain security and decentralization on a deeper tier logic.


Cross-chains and Collaborative Crypto

Another thought for developers, is how to bridge existing blockchains to handle different features within an application. For instant, what if an application could use Bitcoin for financial settlement, but EOS to host more complicated smart contracts within the same application? Could the application evenly distribute weight across several blockchains to bolster its functionality?

There is no point in scrubbing all old blockchains and neglecting all existing networks in lieu of new blockchains. Some blockchains today are operating as intended and provide useful, albeit basic functions. Consequently, many developers are choosing to stick with existing blockchains and are instead building protocols to bolster performance. Features like atomic swaps and sidechains have helped blockchains unify and expedite transactions.


The Death of Blockchain Maximalism

There won’t be a clear winner for crypto. It is more likely that several blockchains will emerge as favorites and intertwine to conquer different transactions in different verticals. The scalability trilemma will always exist in some form, but with collaboration and some of the proposed protocols, developers will greatly diminish the tradeoffs.

To that end, maximalist ideologies surrounding certain cryptocurrencies and blockchain platforms will likely die off in 2019, as they inhibit innovation and collaboration needed for mainstream adoption.


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DISCLOSURE

Authors at Crypto Briefing are invested in cryptocurrencies. The author of this post may be invested in digital assets mentioned here.

Cherie Liu
Cherie Liuhttps://medium.com/moac
Cherie Liu is a Managing Partner of Outpost Capital, as well as the Chief Marketing Officer and Enterprise Partnership Manager of MOAC, a blockchain company based in Silicon Valley. As a Wall Street veteran, Cherie is focused on investing in and advising blockchain, consumer technology, and cleantech companies. She is experienced in team-building, operations, marketing strategy building, and management.

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