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Multichain #2. Status Quo of Onchain and Offchain Scalability Solutions and the Future of Multichain

Hello. This is FirmaChain.

In our last posting, we briefly covered the reasons for blockchain projects needing ‘Scalability’ solutions.

Simply put, ‘Multichains’ are blockchain networks that employ scalability solutions such as onchain and offchain solutions. In this posting, we will take a look at the concept of onchain and offchain solutions and how such solutions contribute to blockchain projects achieving scalability. Furthermore, we will also take a look at the future of multichain and how it is connected to FirmaChain.


On-Chain means recording transactions on a blockchain network. Since the amount of data that can be saved on a single block is limited, the data must be selectively saved on the blockchain network according to the purpose of the network. Based on the aforementioned context, a number of blockchain projects showed movements to solve the scalability issue using onchain scalability solutions such as big block or sharding. Onchain scalability solutions refer to modifying the protocol of the main blockchain network in order to enhance the performance of the network.

Onchain Scalability Solution

SegWit came to the forefront in order to solve the scalability issue of the Bitcoin blockchain network. The digital signature part of the bitcoin block is separated to procure more storage space per block. However, such a method is more focused on solving the transaction malleability problem rather than solving the scalability issue and therefore is more focused on solving security issues.

Big Block simply refers to increasing the limited size of a block. Once you increase the size of a block, more transactions can be recorded per block which results in lesser fees charged per transaction. Since only a simple modification to the code is required in order to increase the size of a block, you might think this method easily solves the scalability issue. However, as always, reality is not so simple as it looks. One problem is that a miner must have a 32GB high performance RAM which would result in only a small number of node operators being able to survive thereby rendering the network to be less decentralized. Additionally, all of the network participants must participate in the hard fork of the network. However, if one or any number of the network participants refuse to participate in the update, the network becomes separated. Such is how Bitcoin Cash (BCH) was born from the Bitcoin network.

Sharding, one of the most widely used onchain scalability solutions, refers to horizontally partitioning a single large database into multiple smaller databases. The horizontally partitioned databases that respectively store the partitioned data are called ‘Shards.’ Sharding solves the scalability issue by distributing workloads which, used to be processed from a single database, to multiple shards. Ethereum(ETH) and Zilliqa(ZIL) are blockchain projects that employ sharding.


Off-Chain, on the other hand, can be seen as transactions happening outside of the main blockchain network. If you distinguish based on the concept of layers, offchain falls under the category of Layer 2. Layer 2 is often referred to as the Second Layer.

Even though onchain transactions are widely considered to be more secure, offchain is a means to solve the scalability issue. Using a variety of scalability solutions, offchain can enhance transaction speed, improve privacy and save cost. In sum, offchain solutions allow a blockchain network to become more efficient.

Offchain Scalability Solutions

Lightning Network (payment channel) is a layer 2 protocol developed on top of the Bitcoin blockchain network by Lightning Labs. Users can instantly participate in an infinite number of transactions at minimal cost. Lightning Network is a type of payment channel where open transactions between two individuals can be carried out. The final transaction between the aforementioned two individuals is then recorded as a transaction on the main blockchain network. The phrase ‘Lightning Network’ can be seen as an instance on the payment channel rather than a network technology jargon. In other words, an offchain payment channel employed on the Bitcoin blockchain network is Lightning Network.

One typical example is Strike, the finance arm of Zap, which is used in El Salvador where Bitcoin was recently selected as a legal currency. Strike is a service which buys and sells Bitcoin on the Lightning Network on a real time basis and transfers them into fiat currency. Note that Strike is in no way related to the cryptocurrency STRK.

Strike CEO Jack Mallers unveiled a litany of high-powered partnerships for Bitcoin’s Lightning Network at the Bitcoin 2022 conference in Miami on Thursday — including an integration with ecommerce giant Shopify, world’s largest POS supplier NCR and payments firm Blackhawk.

Plasma (child chain) is similar to the Lightning Network. A child chain is created under the umbrella of a parent chain and allows the blockchain network to increase the number of transactions being processed. Multiple child chains are branched out from a parent chain and are in charge of processing initial transactions and sending only the results of such transactions to the parent chain, thereby increasing transaction processing speed. Child chain and parent chain are relative concepts and aside from the Ethereum network (main blockchain) Plasma refers to all chains as Plasma chain. Such projects include Polygon (MATIC), OmiseGO(OMG) and Tokamak Network(TON).

Side-Chain is a separate blockchain which runs in parallel to a main blockchain network and operates independently. After Plasma, side-chains are in charge of transferring tokens developed on different blockchain networks. Side-chains employ the layer 2 scaling method, which is connecting separate blockchain networks to a parent chain using two-way pegging. Side-chains are widely known as in general, being similar to layer 2 solutions but different in that they have their own consensus algorithm. However, as of year 2022, most of the scaling solutions that fall under the category of layer 2 solutions can be summarized as being either side-chains or rollups. On a side note, two-way pegging is a method which, when one blockchain network freezes the value of a token the other corresponding blockchain network confirms such change and issues tokens that are of same value to the freezed token. Such projects include SKALE Network(SKL) and Polygon(MATIC).

Rollups carry transactions outside of Ethereum, a layer 1 solution, but post transaction data on layer 1 networks. While maintaining the security of the Ethereum network, it also successfully achieves scalability. Since not all data can be recorded on the Ethereum network, the status root value of the Merkle Tree made using the remaining balance of the users is recorded and managed on the rollup contract.

Rollups can be distinguished into Optimistic Rollups and ZK Rollups. Optimistic Rollup projects include Optimism and Fuel Network while ZK Rollups include LRC and Starkware.

Layer 2 Scaling Solutions Landscape
Layer2 Scaling Solutions on Ethereum

Inter-Chains (cross chain) copies LAN. Blockchain networks are connected using a joint protocol that allows communication between multiple blockchain networks.

Since the concept of Cross-Chain is inclusive of the concept of inter-chain we use both terminology interchangeably.

While inter-chain can function as the layer 2 of a bridge that complements layer 1, a layer 1 can also be structured as an inter-chain network. Such projects include Cosmos(ATOM) and Plokadot(DOT).

The Future of Multi-Chain? EVM vs Non-EVM?

As we have mentioned in our previous posting, the most important factor in solving the blockchain trilemma is to solve the scalability issue. Thus is the reason why countless numbers of scalability solution projects are being developed on both onchain and offchain.

Even though it is a little early to reach a verdict, based on heterogeneous integration using such scalability solutions, the blockchain industry is growing to form multichain networks that are both scalable and diverse.

The growth of multichain can be distinguished into Ethereum Virtual Machine (EVM) and non-Ethereum Virtual Machine (non-EVM). Only history will tell whether the industry will choose layer 2 solutions such as Polygon which help scale the Ethereum network, a layer 1 solution, or whether the industry will develop into multichains which merge existing layer 1 solutions as well as other non-EVM projects such as Cosmos and Polkadot.

Especially, the rapid growth of Cosmos is noteworthy. The IBC interchain protocol is behind the rapid expansion of the Cosmos ecosystem.

With the launch of Osmosis, the first ever DEX based on Cosmos and a DeFi service in and of itself, in 2021, it became possible to not only provide liquidity to the IBC ecosystem but also to use it for enhancing the security of the network.

In the aforementioned context, the continued growth of Terra is also noteworthy.

If EVM is the scaling of the Ethereum network, Terra is a non-EVM based off of the Cosmos network which also supports heterogeneous integration with blockchain networks such as Ethereum using bridge solutions showing a lot of promise and potential as an interchain project.

Multichain Bridge Solutions Diagram

In the past, Terra showed much potential as the second DeFi platform after Ethereum and the market cap of the Terra project is still continuing to grow at a rapid pace even now.

The scalability of interchain projects is an example that successfully shows the possibility of the blockchain industry being able to embrace an ever wider range of heterogeneous blockchain networks under the same roof.

FirmaChain’s Ecosystem Expansion

As we have mentioned before, the FirmaChain mainnet is developed based on Cosmos SDK. Since the Cosmos project had multichain scalability in mind at its inception, at the moment, the project remains relatively flexible to expansion using its hub zone without requiring any special scaling technique.

FirmaChain is considering the expansion of its ecosystem by supporting IBC.

Internally, the team is updating the FirmaChain mainnet based on the upgrade of the Cosmos SDK in order to support IBC. Additionally, the team is making all necessary preparations and is conducting tests in order to seamlessly support IBC.

Interchain Connection Using IBC

On top of actively participating in the Cosmos ecosystem, the FirmaChain team is planning to expand the Colosseum ecosystem through various means one of which include, becoming a liquidity provider of the Cosmos ecosystem by joining the Cosmos DEX and hosting DApps on the FirmaChain mainnet.

Recently, not only in the blockchain industry but also in other traditional business sectors, Web 3.0, Metaverse and NFT are coming to the forefront leading the rapid growth of the blockchain industry. It is an undeniable fact that at the core of this rapid growth, lies blockchain technology and cryptocurrency assets.

With interchain connectivity becoming ever more flexible, many competitive business projects are starting to appear in the market.

Bitcoin gave birth to the blockchain industry which was developed by Ethereum. Now the market is providing the mass public with a wide range of blockchain experiences using scalability solutions. The aforementioned experiences will lay the foundation for effectively accomplishing interoperability between different blockchain projects. We expect such interoperability to intensify even further in the future as different projects in the market continue to compete and coexist within the real economic system.

In this context, from our original intention of merely developing an electronic contract DApp, the FirmaChain team is also preparing to take another step in the direction of becoming a flexible and one stop blockchain platform project that connects different blockchain networks.

We hope you continue to show interest in and follow FirmaChain’s journey.

Thank you.


In this posting, projects that have issued tokens were written as the ticker of the respective tokens. This posting was written based on the information disclosed by the respective projects. We do not, in any way, guarantee the accuracy nor the completeness of the information provided herein and any and all investment related decisions must solely be made at the discretion of the individual making such decisions. The contents in this posting cannot, in any way, be used as legal evidence in case of investment related legal or any other conflicts.


For more information about FirmaChain, or partnership inquiries, please contact us at Those who wish to join the FirmaChain team, please contact us at

About FirmaChain

FirmaChain seeks to replace all written contracts governing social and legal issues by using an electronic contract platform based on FirmaChain’s data blockchain. Since traditional written and electronic documents are easy to forge, and the verification procedures are complicated, blockchain’s decentralization is used to solve the problem. FirmaChain can check the contract’s validity through its hash function, which can be verified in an independent node. This verification process can be used as a means to resolve legal disputes. Blockchain is an effective technology that eliminates the risk of forgery of such documents, and it is applied to the first DApp (decentralized application) of FirmaChain — DONUE.



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