What is Blockchain Scalability?. What exactly is scalability? | by Bitxmi Exchange | The Capital | Mar, 2022


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What exactly is scalability?

The term “scalability” is defined differently by different experts. At its core, however, blockchain scalability refers to the system’s ability to provide a rich experience to every user, regardless of the overall number of users at any given time.

Scalability is a measure of a system’s ability to grow in the most basic sense. In computers, for example, a network or server can be scaled to manage increased demand using many approaches.

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Scalability in bitcoin refers to how well a blockchain can expand to accommodate more users. With more users, there will be more operations and transactions “competing” for inclusion in the blockchain.

See also: Is it Really Possible for Ethereum 2.0 to Go Live in 2022?

The number of transactions handled by a system per second is referred to as its “throughput.” While Visa’s VisaNet electronic payment network can handle approximately 20,000 transactions per second, Bitcoin’s main chain can only handle 3 to 7 transactions per second.

Blockchain networks must be highly scalable in order to compete with traditional payment processing methods. The Bitcoin and Ethereum networks, for example, can handle between 5 and 30 transactions per second (TPS). Visa, on the other hand, has a VisaNet electronic payment network that can process an astonishing 24,000 TPS. Developers are working on a variety of methods to increase the scalability of these blockchain networks.

The most significant barrier preventing blockchains from competing effectively with popular legacy services is a lack of scalability. The widespread adoption of blockchain networks such as Bitcoin and Ethereum is simply not viable without fast transactions.

See also: The Future of Cryptocurrency: The industry that used to be all about Bitcoin is quickly changing

What Exactly Is a Layer 1 Blockchain?

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Every blockchain network’s foundation layer is a Layer 1 blockchain. Simply said, it is a network that serves as a foundation for other protocols, programs, and networks to be built upon. Layer 1 is in charge of programming languages and conscious processes, as well as the rules and settings that enable a blockchain network to function properly. Ethereum, Bitcoin, and Litecoin are the most well-known Layer 1 blockchains.

Even though all Layer 1 blockchains share basic characteristics, they differ in a variety of ways, including:

Validation of blocks (PoW, PoS or PoA)

• The number of blockchains that are part of their ecosystem.

• Compatibility with other networks

• Scalability

While a Layer 1 blockchain can be modified, it is significantly easier to develop a Layer 2 solution on top of it. This will have no effect on the first layer. However, it will provide consumers with advantages such as faster transactions and extra capabilities.

Limitations of Layer 1 Blockchain

The most significant barrier preventing blockchains from competing effectively with popular legacy services is a lack of scalability. The widespread adoption of blockchain networks such as Bitcoin and Ethereum is simply not viable without fast transactions.

The ability to scale The word “trilemma” was invented by Vitalik Buterin, a Russian-Canadian programmer and one of the co-founders of Ethereum, to characterize the necessary compromise required to upgrade the existing blockchain architecture. Three properties must be balanced:

Decentralization

• Security

• Scalability

As Vitalik has emphasized, there must be a trade-off between the three aforementioned features to improve a blockchain. Bitcoin’s creators, for example, chose to prioritize security and decentralization over scalability.

Layer 1 Scaling Solutions Examples

There are several options for Layer 1 blockchain scaling. The first is sharding, which divides the task of verifying and validating blockchain transactions into smaller chunks. This makes the process much easier to handle.

Another option is to use the proof of stake (PoS) consensus process, which is intended to replace the requirement for resource-intensive mining. At the present, Ethereum is transitioning from a proof-of-work (PoW) blockchain to a proof-of-stake (PoS) blockchain.

Layer 1 Blockchain’s Future

Only through scalability will Bitcoin networks be able to compete with existing financial systems. A good network must be able to support expansion in terms of transactions, users, and other characteristics. There is a new generation of Layer 1 blockchains, such as Solana, which tries to overcome the scalability issue.

See also: Comparing the Ethereum (ERC Network) To Binance Smart Chain (BSC Network).

Why does Ethereum require scaling?

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Ethereum supporters believe that the platform will be used to build the next iteration of the Internet. The so-called Web 3.0 would usher in a decentralized topology distinguished by a lack of intermediaries, a focus on privacy, and a trend toward actual data ownership. This foundation would be developed utilizing smart contracts and distributed storage/communication protocols, which are both forms of distributed computing.

To accomplish this, Ethereum must vastly expand the number of transactions it can execute without jeopardizing the network’s decentralization. Unlike Bitcoin, Ethereum does not currently limit transaction volume by limiting block size. Instead, there is a block gas restriction, which means that only a specific amount of gas may fit into a certain block.

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For example, if you had a block gas limit of 100,000 gwei and wanted to include ten transactions each with a gas limit of 10,000 gwei, that would be fine. So would two 50,000 gwei transactions. Other transactions filed concurrently would have to wait for the next block.

See also: BXMI Bep-20 Airdrop and Bounty Programme.

That is not ideal for a system that is used by everyone. When there are more outstanding transactions than available space in a block, a backlog develops. The price of gasoline will climb, and users will have to outbid one another to have their transactions included first. Depending on how busy the network is, certain use cases may become prohibitively expensive.

The meteoric rise of CryptoKitties was a prime example of Ethereum’s limits in this regard. The Ethereum-based game encouraged many users to conduct transactions to participate in breeding their own digital cats in 2017. (represented as non-fungible tokens). It became so popular that the number of pending transactions surged, resulting in severe network congestion for some time.

The Blockchain Scalability Conundrum

It appears that simply increasing the block gas limit would solve all of the scalability issues. Isn’t it true that the higher the ceiling, the more transactions that can be completed in a given timeframe?

Unfortunately, that isn’t possible without surrendering key Ethereum attributes. To explain the delicate balance that blockchains must strike, Vitalik Buterin devised the Blockchain Trilemma (visualized below).

By optimizing two of the three aforementioned features, the third will be deficient.

Blockchains such as Ethereum and Bitcoin place a premium on security and decentralization. Their consensus techniques assure the security of their networks, which contain hundreds of nodes however, this results in poor scalability. The system is substantially slower than centralized solutions because of the large number of nodes receiving and validating transactions.

In another possibility, the block gas limit may be lifted to improve network security and scalability, but the network would not be as decentralized.

This is because more transactions in a block result in larger blocks. However, nodes on the network must download and spread them on a regular basis. And this is a hardware-intensive procedure. When the block gas limit is raised, nodes find it more difficult to validate, store, and broadcast blocks.

As a result, nodes that are unable to keep up should drop from the network. If this trend continues, only a few number of powerful nodes will be able to participate, resulting in further centralization. You might end up with a secure and scalable blockchain, but it won’t be decentralized.

Finally, we can envision a blockchain that prioritizes decentralization and scalability. To be both fast and decentralized, compromises must be made in the consensus algorithm, resulting in lesser security.

What is the maximum number of transactions that Ethereum can handle?

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In recent years, Ethereum’s transaction rate has seldom topped ten transactions per second (TPS). This is a relatively low number for a platform seeking to become a “global computer.”

Scaling solutions, on the other hand, have long been on Ethereum’s agenda. One example of a scaling solution is plasma. Its goal is to improve the efficiency of Ethereum, but the concept might be used to other blockchain networks as well.

What exactly is Ethereum 2.0?

Ethereum, with all of its potential, nevertheless has significant restrictions. We’ve already covered the topic of scalability. In summary, if Ethereum is to serve as the backbone of the future financial system, it must be capable of processing many more transactions per second. Given the network’s dispersed structure, this is an enormously tough topic to solve, and Ethereum engineers have been thinking about it for years.

See also: 16 Things you should know about cryptocurrencies

For one thing, limitations must be imposed to make the network sufficiently decentralized. The higher the restrictions for running a node, the fewer members there will be, and the network will become more centralized. As a result, increasing the number of transactions that Ethereum can execute may jeopardize the system’s integrity by raising the pressure on the nodes.

Another criticism leveled at Ethereum (and other Proof of Work cryptocurrencies) is that it consumes a lot of resources. They must mine to properly attach a block to the blockchain. However, in order to produce a block in this fashion, they must quickly conduct computations that require massive quantities of electricity.

To overcome the aforementioned shortcomings, a significant set of enhancements known as Ethereum 2.0 has been suggested (or ETH 2.0). When completely implemented, ETH 2.0 should significantly enhance network performance.


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