In terms of scalability, Ethereum is one of the most ambitious blockchains. In reality, no other blockchain may have a scaling strategy as comprehensive as Ethereum’s. But, scaling is not unique to Ethereum; every blockchain must be scaled in order to remain relevant in a future blockchain-enabled economy.
What Is Blockchain Scalability?
Before learning about Ethereum blockchain, let’s take a quick look at the Blockchain scalability definition. Blockchain scalability refers to a blockchain network’s capacity to accommodate a high transaction throughput and process a large number of transactions. As a result, a blockchain network that can execute numerous transactions per second (TPS) is considered to be scalable. On the contrary, blockchains with low throughputs have limited scalability. Decentralized systems accomplish decentralization by spreading decision-making to all network members. As a result, they outperform centralized systems that rely on central authority to make choices. Yet, asking numerous individuals to make judgments has downsides.
The Blockchain Scalability Trilemma
Decentralization is a fundamental premise upon which Bitcoin and blockchain were built. Censorship resistance is enabled through decentralization, which allows anybody to engage in a decentralized ecosystem without the need for a central authority or intermediary. Security relates to the public ledger’s integrity and immutability, as well as its ability to withstand 51% assaults or DDoS-like network attacks. Scalability refers to the blockchain network’s capacity to manage an increasing volume of transactions. To become the world computer that its creator envisioned, the Ethereum blockchain must equal the transaction throughput of several centralized systems, such as Amazon, Visa, or Mastercard.
Ethereum scaling solutions
The Ethereum scalability solution is one of the most active subjects in the Ethereum community. Transaction finality – Today, it takes roughly six blocks with Bitcoin and 3-4 minutes with Ethereum for the network to consider a block completed in the main chain. Interested readers should check out Vitalik’s block for transaction settlement and block finality probability. The solutions being implemented or suggested fall into three categories: on-chain solutions, off-chain solutions, and consensus mechanism protocols. There are several apparent or theoretical ones, such as raising block size or dividing one blockchain into numerous different cryptocurrency chains. Because of the nature of peer-to-peer, a standard horizontal scaling technique may not work. Particular to the Ethereum network, some thought was given to stateful vs stateless smart contracts contributing to scalability concerns. We will go through the high-level ideas of all of those solutions before delving deeply into some of the most intriguing ones.
This is comparable to the vertical scaling strategy. Several cryptocurrencies, such as Bitcoin Cash and Ethereum Core, are implementing higher block sizes to improve overall transaction throughput. The assumption behind this technique is that because PoW mining is the key bottleneck in the entire process, raising the block size allows us to process more transactions per mining. It may take a little longer to generate a directed acyclic graph (DAG) for stash-based mining, but the average time to finish the mining may not be affected because most Ethereum clients cache the DAG anyhow.
Another option is to have several tiny blockchains and cryptocurrencies rather than one large blockchain. This may eventually be the case, as many vertical businesses are building or aim to create industry-specific chains. This will lower user activity on each separate blockchain and, thus, should allow for a more scalable ecosystem.
Difference in Chains
This method, however, has a few drawbacks. One is security concerns. It is widely held that if more network nodes engage in blockchain transaction processing, the network will be more secure. With a greater variety of cryptocurrency chains, fewer nodes will run on any one blockchain. This may make the blockchain less safe, as a smaller cryptocurrency network may be more prone to network assaults.
On-chain solutions, also known as layer 1 solutions, are designed to address scalability and performance concerns at the Ethereum blockchain network’s basic layer. The goal of sharding on the Ethereum network is to divide network nodes, the blockchain, and global states into distinct shards, and each shard will establish an agreement on the shard-wide transaction state among those nodes inside the group. At a conceptual level, this is similar to Plasma, the layer 2 side-chain solution, but the technological difficulties, consequences, and network efforts are significantly different.
Another layer 1 or on-chain alternative is to switch to a Proof of Stake (PoS) consensus mechanism, which is one of the most active research topics tackling scalability and performance difficulties in Ethereum. There are several disputes about the benefits and drawbacks of a PoW-based consensus process. It is highly successful in safeguarding the blockchain in the decentralized network, but it is also a big bottleneck in blockchain performance. As compared to the PoW technique, nodes PoS is thought to be more energy-efficient and environmentally benign. It is also viewed as more secure. It effectively decreases the potential of a 51% assault since hostile validators would need to acquire more than 50% of total stakes to take over the blockchain network. Because of the danger of losing “collateral,” such an algorithm is intended to prevent attackers from approving bogus transactions.
Similar to PoW, true decentralization may not be fully attainable in the PoS-based public blockchain. This is because a few affluent nodes might dominate the stakes in the network. Those who put in more stakes essentially control the majority of the vote and have a greater probability of generating a new block. Both algorithms are vulnerable to the social and economic challenge of making the affluent richer.
Similar to the rationales for an on-chain solution, the Ethereum community is actively seeking off-chain alternatives, commonly known as layer 2 solutions. One option is a Plasma side-chain solution. Instead than placing all transactions on the main chain, Plasma allows anybody to establish side chains and connect them to the global blockchain. This is comparable to the Bitcoin lighting network approach. Making several tiny chains is an obvious way to enhance scalability and throughput. This may appear to be a viable option since it may meet both corporate and social goals.
The root chain will provide security and integrity. If any suspicion of fraud is identified in the plasma chains, the transactions will be rolled back, and Plasma users will be able to depart the plasma chain and transfer to the root chain.
Each plasma chain is a blockchain in and of itself. They are linked to the Ethereum root chain through a smart contract. The smart contract acts as a bridge, connecting a whole child chain to the root chain. Anybody can build a plasma chain and write a smart contract that connects it to the root chain. Transactions in the plasma chains will be retained by each plasma chain. The Merkle proof in the block headers will subsequently be utilized to validate data on the child chain. This enables tens of thousands of transactions to be executed in parallel over several plasma chains, while also leaving minimum and sufficient Merkle header information on the root chain to guarantee security:
Independent Plasma Chains
The root chain will act as an arbitrator, analogous to the federal court system in the United States, where the supreme court is the root chain and the plasma chains are the circuit courts or district courts. Once a matter has been determined by the federal district court, it can be appealed to the circuit court or supreme court for arbitration under the federal court system. When fraud happens in a plasma chain, whether it is a double-spend across chains or you cash out more than you have in all accounts, anybody may offer a fraud-proof to indicate the transaction is illegitimate. If the transaction is confirmed to be fraudulent, the transaction will be reversed.
Plasma users can depart the child plasma chain and transfer ethers back to the main chain. The initial plans establish a single validator notion as the operator for the plasma blockchain, to validate and add transactions to blocks, as well as control the state of the child blockchain. The rationale behind this technique is that the root chain enforces the worldwide security and integrity of the blockchain by utilizing either PoW or, more likely, a hybrid PoW and PoS consensus algorithm. In the event that the plasma chain’s validator holds the fund and engages in fraudulent acts, anybody can deliver a fraud-proof against the validator to the root chain.
The Ethereum account model simplifies transaction verification and money transfers at the expense of parallelism. Because all transactions must be validated by all nodes, this may not be a substantial disadvantage. Yet, as the root chain shifts away from transaction processing and toward security enforcement and arbitration, the ability to validate incorrect transactions in parallel becomes critical. The potential Plasma may be able to offer to the Ethereum blockchain network when a tree of Ethereum plasma child chains is coupled with the parent plasma chain and eventually connected to, and secured through, the Ethereum root chain.
Ethereum Root Chain
Enormous scalability will be achieved by outsourcing expensive calculations to the child chains, allowing the root chain to provide shared security and arbitration services to the blockchain on a global scale. There are a few comparable cross-chain interoperability options, such as the Cosmos network. Cosmos network, which claims to be the internet of blockchains, has a hub-spoke integration design. Independent blockchains serve as zones or spokes to the main blockchain, which serves as the hub. Its goal is to make blockchain integration easier by utilizing the IBC (inter-blockchain communications) protocol.
Is Ethereum More Scalable Than Bitcoin?
This is a difficult question to answer conclusively. As of today, Ethereum appears to be more scalable than Bitcoin since it handles slightly more transactions per second. At the same time, because Ethereum’s hashrate is smaller and its network may not be as decentralized as Bitcoin’s, some consider Bitcoin to be more secure than Ethereum. Moreover, Ethereum is increasing faster than Bitcoin, making it prohibitively expensive for the typical user to host a complete node. With Ethereum in the process of transitioning to Proof-of-Stake and adopting a complete modular scalability superstructure, it remains to be seen if the increased scalability that comes with this move will also be safe enough.
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