Dissecting Scalability in the Blockchain network.

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Coinmonks

6 min readJun 18, 2022

What is Scalability?

Scalability pertains to an organization’s, system’s, model’s, or function’s capacity to cope with and operate successfully under increasing or expanding workload or scope. Even when it is put to the test by significantly larger operational demands, a system that scales effectively will be able to maintain or even improve its performance level or efficiency.

Scalability in financial markets refers to a financial institution’s capacity to handle rising market demands; in the corporate world, a scalable organization should retain or increase profit margins as sales volume grows.

What is Scalability in Blockchain?

Scalability in blockchain networks is the ability of that platform to support increasing load of transactions, as well as increasing the number of nodes in the network.

Since the start of this futuristic technical invention, blockchain technologies have grown in prominence significantly. Blockchain technology applications have shown promising levels of success because of a large academic community and industry innovation. Blockchain technology, on the other hand, was designed with the financial industry in mind, though numerous applications of blockchain have emerged.

The following are factors identified that define blockchain scalability;

Transaction throughput: In the blockchain space, transaction throughput refers to the rate of how fast a blockchain processes transactions, which is commonly expressed in transactions per second (TPS). Using timestamps the blockchain system can track how many blocks are generated and added across time intervals. The results of these tests are used to evaluate the blockchain system’s performance and scalability.
Networking: Every transaction on the blockchain is broadcasted to all nodes in the network. After then, anytime a block is mined, it is sent to all nodes once again. As a result, the procedure might use up a lot of network resources while also increasing propagation latency. As a result, having a reliable and efficient data transfer system is vital.
Cost and Capacity: The necessity of storing a significant amount of data on the blockchain is implied by the cost and capacity element in scalability. You must store data beginning with the genesis block and ending with the most recent transactions. However, each node in the blockchain network lacks the resources and capacity required to store such a large quantity of data.

Why is Scalability Important and a Challenge in blockchain?

Take the example of Bitcoin, Ethereum, and Mastercard for finding the ideal answer. They both process almost 7tps (transactions per second) and 25tps (transactions per second) while Mastercard processes almost 5000 transactions every second on average. You can see the difference in performance between Mastercard and blockchain-based technology.

Blockchains, in actuality, function well for a limited number of users. But what will happen if there is widespread inclusion? Ethereum and Bitcoin currently have the most users on the network, and it’s safe to assume they’re having a hard time handling this now.

The following are factors influencing Blockchain Scalability Challenge;

Limitations: The most serious problem with blockchain scalability is its restrictions. When a new transaction is processed, each node adds information about the transaction to the ledger. As a result, the system’s general stability may be affected by the growing transaction history. To maintain high levels of trust, blockchain networks must keep all data accurate. Furthermore, there are hardware restrictions with blockchain. The majority of blockchain scalability challenges are caused by hardware limits. It is becoming more difficult to set up and maintain the hardware necessary for operating nodes as the blockchain network grows.
Transaction Fees: High transaction fees are the next significant aspect that causes serious scalability issues with blockchain. The rising popularity of blockchain networks has resulted in increased complications in transaction validation procedures. For the verification of their transactions, users must pay a charge. Users are willing to pay greater transaction fees for the verification of their transactions as blockchain networks continue to grow. However, many other transactions linger in the queue for an extended period without being processed.
Response Time: Every transaction on the blockchain network should pass a validation process. Because of the large number of transactions in the queue, transactions usually have to wait a long time for validation. Building a new block on the Bitcoin network, for example, takes almost ten minutes. The main causes of the blockchain scalability issue suggest that the increasing number of transactions and users is posing a serious difficulty for blockchain networks. If networks are unable to expand in terms of capacity to accommodate more transactions and users, they risk jeopardizing wider adoption opportunities. As a result, the need for blockchain scalability solutions has skyrocketed in recent years.
Block Size: As the number of transactions on blockchain networks increases, the process of performing transactions becomes more time-consuming.

Scalability Solutions in Blockchain

Improvement in Consensus mechanism: A consensus mechanism is a fault-tolerant process used in computer and blockchain systems to obtain the required agreement on a single data value or network state across distributed processes or multi-agent systems, such as cryptocurrencies.

We can see fault tolerance in a twin-engine airplane when the other engine kicks in based on the failure of one engine.

Proof of Work is the current consensus technique used by blockchain networks like Bitcoin and Ethereum. Even though the Proof of Work consensus technique is secure, it is slow which has made blockchain networks look forward to the Proof of Stake consensus mechanism which does not require miners to solve cryptographic algorithms to generate a hash function but instead ensures consensus through the selection of validators according to stakes in the network. This adoption will significantly increase the Ethereum network capacity while also boosting security and decentralization.

Sharding: Sharding involves breaking down transactions into smaller data sets which are referred to as ‘shards’. Using the Proof of Stake consensus algorithm, nodes stake their crypto tokens and are responsible for transaction validation. The more tokens a node stakes and the longer the stake lasts, the more likely that node will be assigned transaction validation responsibilities. In this case, the POW consensus algorithm can not be used because it requires the participation of all nodes in transaction validation, and nodes can no longer access the entire blockchain ledger.

Summary

The future of blockchain is bright with the viability of its applications in diverse sectors. The availability of specific methods for addressing blockchain scalability challenges shows significant possibilities in dealing with the concerns of scalability trilemma even though there are a lot of studies to be carried out.

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