When talking about the future of blockchain technology, the tech’s scalability issues need to be addressed. Not because it’s anywhere near the most interesting aspect of it, but because it’s the biggest challenge the industry faces today.
Mass adoption won’t happen if blockchains can’t scale, simply because most people will not accept slower applications than they’re used to just for the sake of decentralization.
Since the decentralized ledger that forms the foundation of a blockchain keeps getting bigger with every block added to the chain, scalability is an inherent problem of blockchain technology. Moreover, decentralized networks severely increase the cost of maintenance and transactions, because the nodes need to be incentivized to validate the network.
Then there is the problem that with an increase in the number of nodes in a network, the harder it becomes to reach consensus among these nodes — but less nodes means less decentralization.
These problems inherent to blockchain technology, and decentralized ledger technology in general, have come to light over the past year as cryptocurrencies became more popular. Bitcoin and Ethereum display serious scalability issues, and most other blockchain projects haven’t actually been tested for this yet, as their blockchains haven’t been subjected to serious transaction volumes.
Bitcoin, Ethereum, and close to all other blockchain projects have been working on solving the scalability issues, mostly through off-chain or second-layer solutions. However, several projects have designed their decentralized protocols from the ground up to be able to scale effectively.
In this article, we take a look at the 5 most promising projects doing exactly this.
EOS has been one of the most discussed blockchain projects of the past year and for good reason. The project is trying to tackle the industry’s scalability problems head on with their operating system and infrastructure for decentralized applications.
The cornerstone of EOS’s scalability solution is its parallel processing technology. This design enables dapps to operate and transactions to be processed simultaneously without doubling the load on the network. This is made possible by vertical scaling (adding processing power) and horizontal scaling (adding machines to the resource pool).
Furthermore, EOS employs its own version of a Delegated Proof of Stake consensus algorithm. The EOS network has elected 21 block producers to record blocks. The probability of a block producer to be selected by the algorithm to record blocks depends on the node’s stake in EOS tokens. Less nodes reduces the time to reach consensus on transactions, allowing for faster transactions.
However, there are 2 downsides of the system EOS is using. The first one is that the the pool of 21 block producers is likely not enough to support large-scale networks. Secondly, because of the block producer pool size of only 21 and the DPOS consensus algorithm of EOS, there are serious centralization threats.
EOS claims that its technology has the capacity to process nearly 50,000 transactions per second. What scalability the EOS network is truly capable of will unfold over the next months as Phase 4 of the project commences and includes several promising key features and the optimization of the parallel processing technique.
The IOST project set out to enable blockchain applications (dapps) to handle the transaction throughput of current online giants such as Airbnb and Alibaba. The project’s high transaction volume capability is made possible by the Efficient Distributed Sharding technology it uses.
Similar to Zilliqa, IOST implements sharding to make its network scalable, but has its own customized version of sharding to fully optimize the technique. This customization includes 3 key innovations: TransEpoch, the Atomix Protocol, and Micro State Blocks.
These 3 techniques ensure the highest efficiency of the collaboration and assignment of the different shards of the network, ensuring zero downtime and heavily reducing the workload placed on the separate shards. They also give the IOST network an edge over Zilliqa, as IOST’s technology has addressed several of the issues regarding Zilliqa’s design.
To ensure decentralization, IOST has designed a new consensus algorithm called Proof-of-Believability. This consensus method separates nodes into 2 groups: believable and normal nodes. The believable nodes are the delegated nodes in the system that verify transactions and achieve this status based on their network reputation. The normal nodes verify the believability of the believable nodes.
The team indicated in their technical whitepaper that their blockchain will be able to handle up to 100,000 transactions per second in the long term.
Zilliqa is a next-gen, high-throughput protocol blockchain with the goal of solving blockchain technology’s scalability problems without sacrificing decentralization. At the core of Zilliqa’s scalability solution is their sharding technique. Sharding divides the total nodes of the network up into several smaller subgroups that solve a portion of the network’s total throughput.
In Zilliqa’s case, these shards consist of a maximum of 600 nodes, and once the number of nodes exceeds this, a new shard is created. This means that, theoretically, Zilliqa can scale indefinitely – and even exponentially, based on the network effect. This is because every time a new shard is created, the network can process more transactions simultaneously.
During a recent trial on the testnet, Zilliqa managed to process 2,488 transactions per second, which gave its blockchain a strong proof of concept and a place in the cryptocurrency top 25.
To preserve decentralization, Zilliqa employs a self-designed hybrid consensus algorithm that mixes Proof of Work with Practical Byzantine Fault Tolerance. This hybrid consensus algorithm ensures that the process of assigning nodes to shards and the functioning of the shards remains decentralized.
A downside of Zilliqa is that all nodes are assigned shards simultaneously, which causes idle phases during which the system can’t process any transactions before the nodes are bootstrapped in the shards. It also remains unclear how Zilliqa deals with transformation across shards thus far. Additionally, Zilliqa is currently only capable of handling specific types of smart contracts, but the team has indicated that this will be upgraded.
We’ll see what Zilliqa is really capable of once large quantities of nodes start connecting to the network and the mainnet is released, which is scheduled to happen Q3 2018.
This is made possible by Nano’s block-lattice architecture, which lets each Nano wallet have its own unique blockchain, the so-called account-chain. There are of course a lot more technical details to this process, but the account-chains enable the blockchain to be trusted by only verifying the latest block of each account chain.
Because only the last chain-account blocks are added, Nano’s network is highly scalable, allowing for instantaneous and feeless transactions.
Besides combining blockchain and DAG structures, Nano also has a hybrid consensus algorithm, mixing Proof-of-Work with Proof-of-Stake. To prevent network spamming, Proof of Work is used for processing transactions. Proof of Stake is used for the DAG structure and provides a representative system for the validation of transactions, in which representatives are voted on by Nano token holders to validate the network.
There are a lot more technical elements to the Nano project, which you can read all about right here.
The IOTA network doesn’t run on a blockchain, but on a customized version of the Distributed Acyclic Graph (DAG) structure called Tangle. The Tangle is a database structure that has no blocks, no chain, and no miners. Because of this, IOTA works very differently from blockchains.
Since there are no miners, IOTA employs a novel method of verification of transactions. Transactions on the IOTA network are feeless. Instead, users “pay” for their transactions fees by approving 2 past transactions by conducting a small amount of Proof of Work. Thus, they actively participate in achieving network consensus.
This technique is called parallelized validation of transactions, and it is the key to the network’s scalability. It enables a limitless number of transactions that can be confirmed in a certain interval. The more transactions are made on the IOTA network, the more secure and efficient its Tangle structure becomes.
Even though large companies, including Volkswagen and Microsoft, have demonstrated their interest in the IOTA project, the team is still working on a proof of concept, as indicated by the several issues that have occurred regarding IOTA’s architecture over the past year. These include several MIT professors finding a major security flaw and centralization concerns because of the coordinator role in the network.
Again, IOTA really needs to be tested in real-world cases on a large scale to prove the project’s viability. If you want to understand IOTA’s technology better, click here.
If we ever want to have blockchain technology used by the masses, the technology must be able to match the speed of the software we are currently using.
Right now, it falls short – and that’s exactly what these 5 projects are trying to solve from the ground up.
Each of the projects has its own unique approach to solving scalability, and they each target different industries. Clearly, there is ample room for all of these projects to develop — and perhaps even cooperate — and it will be very interesting to see how they unfold over the course of the next few years.
As decentralized ledger technology is still in its early stages, the 5 described projects aren’t really competitors but rather 5 experimental technologies that are trying to solve the same complex problem. Parallel processing, sharding, and DAG structures are the prospective solutions are offering to combat scalability issues, and only time will tell which project and technology will win the battle.