Blockchain projects are known for their vision and ambition — but what they prioritize and what they’re known for can vary. Normally, projects rotate around three core concepts: decentralization, scalability and security.
Coined by Vitalik Buterin, The Blockchain Trilemma addresses the challenges developers face in creating a blockchain that is scalable, decentralized and secure without compromising on any one facet.
Blockchains are often forced to make trade-offs that prevent them from achieving all three aspects:
- 1.Decentralized: creating a blockchain system that does not rely on a central point of control
- 2.Scalable: the ability for a blockchain system to handle an increasingly growing amount of transactions
- 3.Secure: the ability of the blockchain system to operate as expected, defend itself from attacks and mitigate other unforeseen issues
While some developers believe that the blockchain data structure itself has inherent limitations that prevent it from scaling, many architects, including CertiK, believe that it’s possible to build a blockchain project that hits all three targets.
The Trilemma’s fundamental elements
Decentralization is a core component of blockchain. In traditional finance, the system is entirely centralized. Customers pass control of their assets to banks, from their personal documentation to their assets themselves, for the banks to handle with full control.
Bitcoin and other early cryptocurrencies offered a decentralized and transparent alternative, serving as the issuance and storage of money, without the need for a centralized entity.
Decentralized systems matter because they empower permissionless ownership where anyone can use and build on the platform. Decisions are made by consensus, which means transactions are approved by a group of nodes as opposed to an individual node.
Once these transactions are verified by consensus, they can’t be altered after the fact. Therefore, risk isn’t placed in one central entity, and trust doesn’t rely on another individual when conducting a transaction.
The trade-off of pure decentralization, however, is speed. If a transaction requires multiple confirmations before reaching consensus, then inherently, it would take longer than if a transaction can be confirmed by a single entity. Bitcoin is known to be robustly decentralized, but at the same time, pretty slow.
Scalability is important for mass adoption. It’s the question of how much a blockchain system can sustain, and whether the system can operate smoothly as demand increases.
Let’s use EOS, a blockchain project focused on scalability, as an example. Currently, the current maximum throughput of EOS is claimed to be around 4,000 transactions per second (TPS). More importantly, the EOS whitepaper describes the track for EOS to process millions of transactions per second in the future.
But, as the trilemma suggests, there is a trade-off. EOS serves as an example of what a focus on scalability may offer, but it has received criticism for being too centralized.
As a novel, promising technology looking to make its name by improving existing infrastructure, the security of a blockchain system is paramount.
With a barrage of high-profile hacks of exchanges and manipulated vulnerabilities in source code, it’s evident that many crypto projects had chosen to focus on decentralization and scalability, leaving security behind.
Blockchain ecosystems, for all their upsides, hinge on the strength of the underlying source code — like anything else, it must be carefully examined.
Due to the transparent nature of the source code and the potentially lucrative benefits one can receive from conducting a successful attack, blockchains have become prime targets for hackers.
While scalability focuses on the upside, security prevents the downside — something just as important, but all too often forgotten. Promising blockchain use cases have faced setbacks that stifled their growth, such as the notorious DAO attack, which was the result of improper source code security.
Will the Trilemma be solved?
There is plenty of speculation regarding a blockchain's ability to solve the Trilemma –– it's a major driving factor of the entire market.
While solutions are being ideated with each passing day, there is no single blockchain that's been able to succesffuly mitigate all three elements of the Trilemma. However, with the rapid rate of innovation taking place in the crypto industry, it could only be a matter of time before it's solved.