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What is the blockchain trilemma

At one time, blockchain was a truly breakthrough technology, offering effective solutions for outdated financial systems. To a certain extent, it was.
But later, the technology began to discover its own shortcomings and weaknesses. Eventually, the main ones were formulated into what is known as the blockchain trilemma.

Definition

The blockchain trilemma is based on three fundamental principles of blockchain ecosystems:

Decentralization;
Scalability;
Security.
This theoretical model was expressed by Vitaly Buterin, the founder of the Ethereum network. Its essence is that any decentralized project can solve only two of the three problems simultaneously.

The most obvious and basic example of this theory is the world's first cryptocurrency, Bitcoin. Despite the fact that it is still the most popular and in demand, this blockchain quickly demonstrated its shortcomings.

The main disadvantage of Bitcoin has been its scalability. This network is not capable of processing a large number of transactions quickly: its throughput is only about 5 transactions per second. Followers of the project have tried to solve this problem, but so far no one has succeeded in doing it perfectly.

The problem of decentralization

Decentralization has to do with the number of nodes (computers) that run the blockchain. The decentralized nature of the blockchain infrastructure is of paramount importance here: the major breakthrough of Bitcoin was to solve the double-spending problem characteristic of centralized environments.

It is decentralization that is the most important of the three elements. When the first cryptocurrency was launched, its idea was to offer a more democratic and accessible financial system.
Security

Security has to do with encryption and, very importantly, consensus mechanisms. It determines how many network nodes must approve a transaction before it becomes final, as well as the principle and amount of the reward to be distributed. Many algorithms have been invented to date - Proof of Work, the most famous, but energy-intensive and non-environmental one, its most popular alternative Proof of Stake, Proof of Authority and others.

Smaller blockchains often have a security problem - for Proof of Work ecosystems, for example, it can be a 51% attack, where a node that gets more than half the power of the network can control it at its own discretion.
Scalability

Finally, scalability refers to a blockchain's ability to maintain the desired performance by providing high transaction speeds with a heavy load on the network.

This is where the problem arises. The previous points can still be solved, but this is where developers have the hardest time. Meanwhile, providing a scalable blockchain is the only way to compete with much faster centralized systems.
Solutions

Developers have taken different approaches to solving the trilemma, and by 2022, they've almost solved it. For the remaining scalability challenges, there are two approaches: first-tier methods, that is, improved consensus mechanisms or splitting transactions into smaller pieces; second-tier methods in the form of state channels or nested blockchains.
  • Ethereum
  • Bitcoin
  • XRP
  • Binance Coin
  • Tether
  • Litecoin
  • Stellar
  • Dash
  • Doge
  • Tron
  • YooMoney
  • TON
  • Tinkoff
  • Sberbank
  • Alfa Bank
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  • VISA
  • ADVCash
  • Payeer
  • PerfectMoney