, 2 years ago

The Blockchain Trilemma

Blockchain technology offers a lot of opportunities for science, businesses as well as the retail market. But each technology has its limits. The blockchain trilemma describes the one problem that no blockchain has solved so far.

Three important features

Blockchain technology comes with three important main features:

  • Scalability
  • Security
  • Decentralization

Scalability is about speed. In one sense it measures the time until a transaction is confirmed on a blockchain. It also refers to the amount of transactions that can be handled at the same time. A slow confirmation time with only a couple of transactions per block isn’t very attractive. Therefore, blockchain technology must be scalable.

Security means that each party has to be sure that they can receive, sent and store value without risking losing their assets. A blockchain needs to be secure, otherwise, nobody will put trust in it.

Decentralization refers to the fact that blockchain technologies are meant to prevent the control of a single entity. The more distributed the underlying infrastructure gets, the more reliable becomes the whole network. In this sense decentralization is also a security feature by design.

Understanding the Trilemma

The blockchain trilemma is basically built around the fact that you cannot get all three features. Putting emphasis on two of them automatically means that you have to sacrifice the third. Bitcoin is a secure and decentralized cryptocurrency because its blockchain is equipped with both features. But its scalability is more than debatable.

A highly scalable solution that is secure at the same time isn’t decentralized. Meaning that a single entity runs the blockchain, but can guarantee in return that transactions are super-fast. But being centralized means that this entity or company could easily exclude anybody from their network.

Blockchains that are highly decentralized and scale very well usually have security issues, because they have to sacrifice in this field to become highly distributed while being fast and offering a high transaction throughput at the same time.

Can it be solved?

Yes, it can be solved in theory. Still, until this day nobody has succeeded in doing so. At the same time, a lot of cryptos have claimed that they did. The blockchain which solves the trilemma first would be considered the most advanced technology.

But it doesn’t have to be solved, because at this point each technology has its very own use case. Bitcoin is considered digital gold by many analysts because it is secure and decentralized. But it would likely fail to serve as a supply chain management solution because it is too slow.

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