Discussions around Transaction Scalability
Further to our discussion in part-1, today we discuss the second problem in blockchain scalability i.e. Transaction throughput
Here we go!
Challenge 2: Transaction throughput
Sidechaining — You can create “blockchains of blockchains” achieving further decentralization and increasing throughput.
A sidechain is defined by a custom “rule-set” and can be used to offload computations from another chain. Individual sidechains can follow different sets of rules from the mainchain, which means they can optimize for applications that require extremely high speeds or heavy computation, while still relying on the mainchain for issues requiring the highest levels of security. You can even go for a better consensus mechanism on the side chain.
Payment/State Channels — Payment channels are a way to repeatedly transfer value between parties by offchain transactions without having to pay the huge transaction fees induced by transacting multiple times.State channels are the general form of payment channels, applying the same idea to any kind of state-altering operation normally performed on a blockchain.
One such solution is the Raiden Network on Ethereum. The Raiden Network, in contrast to conventional on-chain transactions, does not require any fees. This is achieved using “digitally signed and hash-locked transfers, called balance proofs, fully collateralized by previously setup on-chain deposits that allow these transfers to be performed instantaneously and without any involvement of the actual blockchain itself, except for an initial one-time on-chain creation and an eventual closing of the channel.”
Hashgraphs — This new consensus algorithm also has a peer-to-peer architecture, but it rectifies the genetic flaws of blockchain, such as latency, energy wastage, expense, and proof-of-work.Unlike blockchain, which is a data structure organised into a series of interconnected blocks, hashgraph comprises of a chain of events. A block consists of a timestamp, the transactions that occurred, the hash of the block, and its predecessor. Hashgraph uses a consensus protocol that uses gossip history to create a directed graph.
In a blockchain, if two miners create two contesting blocks, the proof-of-work is scrutinised and one block is discarded. This can be compared to a tree whose branches are pruned and only the trunk advances upwards. Hashgraph is proven to be fully asynchronous Byzantine.
Consensus Mechanism — Changing the consensus mechanism too can impact the block time, and transactions verifications. There are four main methods of finding consensus in a blockchain (and all distributed systems, for that matter): the practical byzantine fault tolerance algorithm (PBFT), the proof-of-work algorithm(PoW) ,the proof-of-stake algorithm (PoS), and the delegated proof-of-stake algorithm (DPoS). Ethereum’s Casper update involves moving to Proof of Stake consensus mechanism to improve the current state of transaction verification times. All of the above are modified with custom set of rules by different blockchains and used to achieve their desired transaction times.
Stay tuned for Part-3.
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