Blockchain arrived in the domain of technology like one of the remarkable phenomena you get to witness once in decades. The benefits of blockchain technology grabbed the attention of every industry and business owners were quick to dive into blockchain projects right away. The discussions about blockchain architecture in scalable solutions have been gaining the spotlight recently as more organizations want to capitalize on the potential of blockchain.
Blockchain technology promises decentralization, transparency, immutability, and cryptographic security. The use cases of blockchain in cryptocurrencies, DeFi and optimizing supply chain operations showcase how it can revolutionize traditional processes. However, the limits on scalability become the biggest roadblocks for embracing blockchain technology. Do you need new blockchain architectures for better scalability? An overview of blockchain architecture for scalable solutions can offer the perfect answer to such questions.
Unraveling the Root Cause of the Scalability Problem
The architecture of the first blockchain networks like Bitcoin and Ethereum focused on achieving decentralization and cryptographic security. These blockchain networks did not think too much about speed and throughput, which will be required for mass adoption. Any blockchain solution architecture you can think of will have to deal with the challenge of the blockchain trilemma. It specifies that any blockchain architecture can be optimized to achieve one of the three core properties. The core properties are decentralization, security and scalability.
If you want scalable blockchain architecture, then you will have to sacrifice either decentralization or security. On the other hand, blockchain can establish the foundation for future digital solutions only if its architecture supports scalability. You can think of an example like the Bitcoin blockchain, which prioritizes security and decentralization with the Proof of Work consensus mechanism. With these two traits, the Bitcoin blockchain can complete a few transactions in one second. Therefore, solution architects have to come up with solutions that bypass the blockchain trilemma completely without any trade-offs.
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Redefining Scalability at the Layer-Level Architecture
The growing demand for scalability invites the need to embrace an ingenious approach to blockchain architecture design. Traditional monolithic approaches holding back the potential for scalability in blockchain must give way for layered approaches. The layered approaches to scalability focus on classifying different functions that will help in optimizing distinct layers for specific tasks.
Layer 1 Scalability Solutions
The layer 1 blockchain or the base protocol refers to the actual network that helps in validating and confirming transactions. You would have to make changes in the blockchain protocol itself to achieve scalable solutions at layer 1. The most promising layer 1 scalability solutions that have gained traction include sharding and consensus mechanism upgrades. A simple transition from Proof of Work to efficient consensus mechanisms like Proof of Stake can enhance throughput. Ethereum is one of the best examples of how you can enhance scalability with consensus mechanisms upgrades in the base protocol itself.
The next solution to achieve scalability in the foundational blockchain architecture layers is sharding. It works exactly like database partitioning by splitting the complete blockchain state, including the ledger and transactions, into smaller portions. The small portions or shards facilitate independent and parallel transaction processing, thereby offering the flexibility to process more transactions. Sharding enhance transaction processing exponentially as every node does not have to process each transaction that comes to the blockchain. As a result, you don’t have to worry about storage and transaction processing scalability at the base layer.
Another common change in the base blockchain architecture recommended for enhanced scalability involves increasing the block size. By increasing the block size, the blockchain network can accommodate more data in one block. It helps in boosting throughput albeit with concerns of sacrificing decentralization due to the need for more hardware requirements in each node.
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Off-Chain Scalability Solutions
The ideal solutions to resolve scalability challenges with modifications in blockchain architecture also include layer 2 or L2 solutions. Layer 2 solutions work as protocols developed on top of the base blockchain protocol. The answers to “what are blockchain scalability solutions?” would point at layer 2 solutions as the most effective choice. L2 solutions move a major portion of transaction processing tasks off the main blockchain and execute transactions at higher speed with lower costs.
The working of layer 2 solutions is similar to that of a highway bypass in which the base layer handles transaction settlement and the off-chain layer handles high transaction traffic. You can notice that layer 2 solutions offer the best scope for innovation in blockchain architecture design to improve scalability. An overview of the notable L2 solutions can offer a better impression of how they can redefine conventional notions on blockchain scalability.
The foremost addition among L2 solutions for scalability would be sidechains, which are independent blockchains connected to the base layer. Sidechains are connected to the main blockchain through a two-way peg and use their own consensus mechanism. In addition, sidechains also use their own security mechanism, which is different from that of the main blockchain.
Another notable example of redefined blockchain architecture in scalable solutions points at rollups. You can also call them as the gold standard for L2 solutions, especially on platforms like Ethereum. Rollups help in executing transactions outside the main chain and bundle transactions into a small batch. After bundling the transactions, rollups post a summary of transaction data to the main chain.
You will find two popular variants of rollups in the blockchain space, which are optimistic rollups and zero-knowledge rollups. Optimistic rollups work with an optimistic approach by assuming that all transactions in one batch are valid. On the other hand, zero-knowledge rollups rely on complex cryptography to generate validity proof for a transaction batch before posting the summary on the main chain.
You cannot make a list of blockchain scalability solutions without thinking of state channels. The utility of state channels in blockchain solution architecture becomes more evident in private transactions. State channels help in opening private, off-chain communication channels between two or more users for conducting multiple transactions.
A state channel will only record the initial funding and the final balance on the base chain. The most popular example of using state channels to achieve better scalability is found in the Lightning Network for Bitcoin.
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Final Thoughts
The architecture of blockchain solutions tailored for scalability is significantly different from the early blockchain designs. You can notice the growing demand for scalable blockchain solutions as blockchain adoption gains momentum in different industries. The fundamental changes in blockchain protocols, including consensus mechanism upgrades and sharding, offer effective solutions to enhance scalability. On the other hand, layer 2 solutions move one step ahead and improve throughput without any changes to the base layer. Discover more insights about blockchain scalability and the best practices to achieve it.
