The biggest hurdle for blockchain adoption is scalability. Mobile and desktop applications spoiled consumer expectations for performance and responsiveness. The latency of 1994 is unacceptable in 2018. The slow grind towards production-ready scalability solutions kills the pace of development and embrace of decentralized applications (Dapps).
Dapps aren’t able to sustain users. Dapps are crippled by the performance of smart contract cryptocurrency platforms like Ethereum. High gas costs, low-throughput capacity, and slow confirmation speeds are major problems facing blockchain platforms.
Despite the scalability problems at hand, there have been some noteworthy and dynamic developments over the last couple of years to address the scalability of decentralized blockchain networks.
Problems Facing Smart Contract Platforms and Dapp Usage
The general limitation that blockchain networks face at inception and beginning phases is best outlined by Ethereum founder Vitalik Buterin as the Scalability Trilemma. This is the necessary trade-off between security, decentralization, and scalability.
Ethereum sacrificed scalability to ensure robust security and decentralization. As a Turing-complete smart contract platform, Ethereum’s scalability problem is compounded by complexity required to scale to production thresholds. However, Ethereum still stands as the most popular platform for dapps despite problems plaguing dapps (specifically games) such as extraordinarily high gas costs during periods of network congestion.
Network effects are a powerful motivator for dapp developers. The majority of dapp developers continue to build on Ethereum despite its current limitations because of large audience (ie — customers).. As a result, even if developers begin to wander away from building on Ethereum, it will take a substantially improved platform with a forward-thinking approach and immense gravity to attract a migration of developers over the long-term.
Ethereum’s limitations highlighted the pressing needs for scalable dapps to retain users. Dapp games represent the best example as they are too expensive to play and actual gameplay leaves much to be desired. Just ask anybody who played Etherbots, or take a look at the top dapps for Ethereum on DappRadar. You will notice the top dapps are mostly DEXs, gambling platforms, or games focused on crypto collectibles rather than gameplay (i.e., CryptoKitties).
So how exactly do dapps begin to retain substantial numbers of users? Well, for widespread adoption, they need to match the scalability and responsiveness of traditional apps that run on centralized servers. Some platforms like Gods Unchained take a hybrid approach with the game on a centralized server and the assets on the blockchain.
Building on centralized servers runs contrary to the whole notion of building dapps in the first place. That is why there are appealing solutions racing to produce the first generation of scalable dapps.
Scalability solutions come in all shapes and sizes, particularly platform-oriented or platform-agnostic. Many emerging platform-oriented solutions that focus on scalability include EOS, Zilliqa, and DFINITY. Regarding dapps, scalability solutions that have achieved the most focus at the application-specific level are layer 2 solutions. These consist of innovations such as State Channels and Sidechains.
The most well-known state channel is Bitcoin’s Lightning Network (LN), and it is an excellent method for enabling Bitcoin — a value-focused and payment solution network — to scale to the necessary levels for mainstream adoption.Despite state channels’ ability to facilitate bidirectional digital payments off-chain, limitations include large communication overhead and needing to be written in smart contract-specific languages.
Moreover, generalized state channels are necessary to implement arbitrary state machines that are optimal for dapps to scale, and those types of state channels are still under heavy engineering and theoretical development.
Promising dapp scalability innovations that recently made headlines emerged from dapp gaming. Specifically, the Loom Network’s use of sidechains — Dappchains as they call them — have some real potential to launch a new wave of dapps. The Dappchains effectively function as sidechains pegged to Ethereum with their own DPoS consensus to scale to levels of mainstream, centralized apps. These are a form of application-specific sidechains and are worth your attention moving forward.
Ethereum’s Plasma implementation is also an off-chain sidechain implementation focusing on “child chains” connected to the Ethereum primary “root chain” for offloading computation and alleviating network congestion. Notably, Plasma at this stage only handles the secure transfer of crypto assets rather than general state changes.
A compelling case of production-ready scalability of dapps comes in the form of the recently announced Tenfold Protocol from startup Binary Mint. The Tenfold Protocol consists primarily of 3 components: a state registry, validator network, and liquidity market.
Each dapp is a single state registry which fundamentally is a Token-Curated Registry (TCR). definition of bounded vs. unbounded is warranted. Unbounded transfers would be asset transfers, such as sending ETH. A bounded transaction might be a social media post, a dragon levelling up, or a micro-transaction.
Tenfold makes a distinction between bounded and unbounded transactions by processing unbounded transactions on-chain for maximal security and transitioning bounded transactions off-chain using a crypto-economically secure model. Notably, this allows Tenfold to vastly improve performance while reducing gas costs, be both blockchain and language-agnostic, compatible with Plasma, and available for developers to use now.
The race for scalable dapps is accompanied bynovel technologies and fascinating developments in decentralized scalability. Whether more complex platform-oriented scalability solutions or application-specific innovations will attract the next generation of dapp users is set to unfold.