A blockchain is an open, distributed digital ledger that can record transactions between parties efficiently and in a verifiable manner. It is an organization of hash chains inside another hash chain to form a growing list of records that are linked by cryptography.
Blockchain platforms are used for cryptocurrency exchanges, smart contracts, finance management, gaming, supply chain management, and others since they are resistant to data modification and offer users openness, trust, and security. For a blockchain platform to be efficient, it needs to tackle the blockchain trilemma. This trilemma involves the generally accepted idea that it is not possible to run a blockchain effectively without compromising either of decentralization, scalability, or security. Solving the blockchain trilemma helps to ensure consistency, availability, and partition tolerance of the blockchain.
What Is Blockchain Scalability?
Blockchain scalability is the potential of a blockchain network to operate a thriving transaction base effectively. It involves the ability of a network to handle an increased workload.
The determinants of blockchain scalability include the transaction rate (TPS), block height (number of transactions per block), and transaction size. These determinants are important as the higher the TPS and/or the bigger the blocks, the higher the ability of a blockchain protocol to accommodate workload increases efficiently.
Although blockchains such as Ethereum have shown how to secure a ledger in a purely decentralized set-up, they are not scalable. The ever increasing size of these blockchains has led to scalability issues. Bitcoin, the most secure and decentralized cryptocurrency at the moment has an issue with scalability as it is only capable of processing just 7 TPS on average. These blockchains have tried to solve the scalability challenge by increasing the size of the blocks. However, the possibility of increased centralization limits this effort.
Also, it has been argued that increasing the block size will cause miners or validators to lose incentive as transaction fees will decrease. The reduction in the number of miners or validators will decrease the overall hash rate of the blockchain.
What Are The Problems Associated With Blockchain Scalability?
The challenges with scalability arise from the high amount of time taken to add to a block and the time taken to reach a consensus. These issues include limitations, small block sizes, long response time, and high transaction fees. I briefly explain each of these problems below:
i. The first blockchain scalability problem involves limitations. In the average blockchain, processing a new transaction involves adding information to the ledger. This leads to the buckling of the overall system as the payment history increases resulting in the diminishment of trust levels.
ii. Another major scalability problem is the low block size. For most blockchains, the initial block capacity is 1megabyte. This block capacity can only accommodate about 2000 transactions at a time. As the blockchain gets more popular, accommodating an increase in the number of transactions carried out becomes a challenge.
iii. The slow response time is another scalability problem. In a blockchain network, every transaction has to be validated. For the validation to occur, transactions usually have to wait in line for validators to process them. The higher the number of transactions in the queue, the longer it takes for transaction processing. This increases during peak times and is inefficient.
iv. The high transaction fee associated with congested blockchains is also another scalability problem. As a blockchain becomes popular and attracts more users, the validation process becomes more complicated. Users who want their transactions to be validated quickly usually have to pay higher transaction fees. This reduces the efficiency of the blockchain.
The Needs for Scalability
An ideal blockchain needs to be fast and scalable. It should be capable of handling thousands of transactions while resisting attacks such as the Sybil attack, 51% attack, and denial-of-service (DOS) attack. In a bid to become scalable, some blockchains such as Ripple prioritize scalability and security over decentralization, making them Blockchains In Name Only (BINO).
The ever increasing size of blockchains such as Bitcoin and Ethereum has led to scalability issues. Without scalability, a blockchain network would become very slow and vulnerable to being congested.
Solution to the Scalability Challenge: The Algorand Approach
The Algorand blockchain tackles the scalability challenge using two approaches;
a. Pure Proof-of-Stake (PPoS) protocol:
The Algorand blockchain uses the pure Proof-of-Stake protocol to select a small set of block proposers and validators randomly. This helps to ensure that users reach consensus easily on the next block as they only need a fixed number of messages. This is in contrast to previous Byzantine Agreement protocols where every user receives a message from all other users or relies on ad-hoc chains of trust.
Unlike blockchains using the Proof-of-Work protocol such as Bitcoin, Algorand's consensus protocol does not require participants to solve complex puzzles to validate blocks. The only computational cost a single user pays involves generating and verifying signatures. If computation ever becomes a burden on the user, increasing the computational power will directly improve performance. Due to this efficient layout, the Algorand's consensus protocol can scale to millions of users and process numerous transactions at a time without incurring high transaction fees.
b. PointProofs System:
The PointProofs system also helps to improve the scalability of the Algorand blockchain. The PointProofs System is a new vector scheme that supports non-interactive aggregation of proofs across multiple commitments. Both proof and commitment are only 48bytes.
PointProofs are very efficient. On a single thread, it takes 0.08seconds to generate a proof for 8 values for one commitment. This helps to ensure scalability as on-chain storage and network bandwidth requirements are minimized.
In summary, the scalability of the Algorand blockchain is ensured by the efficient architecture laid out by Silvio Micali and his team using the pure Proof-of-Stake protocol while incorporating the PointProofs system.