Blockchain scalability is being improved in a variety of ways to make decentralized networks more efficient and practical for mainstream use.
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Blockchain scalability refers to a network’s ability to process a growing number of transactions as user demand increases. It is one of the most critical challenges facing blockchain technology today, with limitations causing slow transaction speeds, high fees, and network congestion.
These issues create significant barriers to widespread blockchain adoption. To address this, Layer-1 and Layer-2 scaling solutions are being developed and implemented. Programmers are finding ways to boost blockchain throughput, efficiency, and capacity, making it more viable for mainstream use.
While offering decentralized trust and security, blockchains face significant challenges in scaling their operations. The core of this issue is the fundamental trade-off between maintaining trust minimization — ensuring the system remains secure, decentralized, and intermediary-free — and achieving the transaction speeds and cost effectiveness found in traditional systems like payment processors or financial databases.
As the demand grows for blockchain-based applications, these networks often struggle with transaction latency, network congestion, and inefficiencies. For example, Bitcoin and Ethereum, two of the largest blockchains, can process far fewer transactions per second (TPS) than centralized systems like Visa or PayPal. Bitcoin's averages 6-8 TPS and Ethereum averages 12-15 TPS, while those more traditional systems process thousands of transactions per second. The disparity becomes more of a problem as user activity increases, leading to slower confirmation times, higher fees, and overall decreased performance.
Hedera, which is not a traditional blockchain but a distributed ledger, uses hashgraph consensus rather than Bitcoin's Proof of Work, averages about 2,500 TPS, according to Arkhia Metrics.
Scalability limitations are a critical obstacle to the widespread adoption and utility of distributed ledger technology (DLT). Without addressing these challenges, blockchains risk being relegated to niche use cases rather than serving as the backbone for broader applications like decentralized finance (DeFi), digital identity, or supply chain tracking. To truly enable mass adoption, blockchain developers need to find innovative solutions to overcome scalability hurdles.
Improving blockchain scalability is necessary for the long-term success of decentralized networks. Scalability not only addresses current limitations but also paves the way for wider adoption and more practical use cases. Here are some key benefits that come with boosting blockchain scalability:
Higher transaction throughput and capacity. Scalability allows blockchain networks to handle more transactions per second, increasing the system’s capacity. As the network grows, it can continue to process high volumes of transactions without delays or congestion, making it suitable for large-scale use.
Lower costs and faster transactions. With improved scalability, transaction fees become lower, and processing times become faster. This makes blockchain systems more affordable and efficient, allowing them to compete with traditional financial systems. Lower costs and speed are essential for gaining traction in everyday use cases.
Enabling key applications to flourish. Scalability supports the growth of various DLT-based applications, such as digital payments, asset tokenization, decentralized finance (DeFi), gaming, and NFTs. These applications rely on high throughput and low costs to be viable and widely adopted. A scalable infrastructure ensures they can operate efficiently and attract more users.
Fostering mainstream adoption. By improving scalability, blockchain technology becomes more accessible and practical for a wider audience. This enhances the user experience and makes blockchain more appealing to businesses and individuals, which is key to unlocking its full potential and helping it evolve from niche technology to mainstream infrastructure.
Ensuring blockchain scalability is not just about improving technical performance — it’s about unlocking the full range of blockchain applications and making decentralized systems a practical and competitive choice for the future.
Blockchain networks are built with three key goals in mind: decentralization, security, and scalability. However, the scalability trilemma suggests that blockchains can optimize only two of these properties simultaneously, making it challenging to achieve all three at the same time.
Decentralization ensures that no single entity controls the network, preserving the core principle of distributed power.
Security guarantees the network remains safe from attacks or manipulation, protecting user data and transactions.
Scalability, in turn, focuses on increasing the network’s capacity to handle more transactions efficiently as usage grows.
The trilemma arises because improving scalability often requires compromises in decentralization or security. For example, increasing transaction throughput might involve reducing the number of nodes that participate in verifying transactions, which can undermine decentralization. Similarly, adopting methods that speed up transaction processing might introduce vulnerabilities or otherwise weaken the network's security.
This trade-off presents a significant challenge for blockchain developers. Achieving scalability without undermining the principles of decentralization and security is a complex balancing act that continues to shape the evolution of blockchain technology.
Several strategies have been developed to address the scalability challenges that blockchains face. These approaches can be broadly classified into Layer-1 (on-chain) solutions, Layer-2 (off-chain) solutions, and improvements in consensus mechanisms. Each method seeks to increase throughput and efficiency while maintaining decentralization and security.
Here’s an overview of the most common approaches:
Layer-1 solutions involve making changes directly to the blockchain’s base protocol. These methods modify how a blockchain operates to handle more transactions and improve efficiency.
Increasing block size and reducing block time. One straightforward approach is to increase the size of each block, allowing it to include more transactions. Additionally, reducing the time it takes to generate a new block can help speed up transaction processing. However, larger blocks require more storage and computational power, which could lead to centralization if fewer nodes are able to keep up with the increased requirements.
Segregated Witness (SegWit). SegWit is a protocol upgrade that separates signature data (used for transaction verification) from the main transaction data. By removing this data from the block’s main structure, space is freed up for additional transactions, effectively increasing the block’s capacity. Bitcoin adopted SegWit to address scalability issues without fundamentally changing its structure.
Sharding. Sharding involves splitting the blockchain into smaller, parallel sub-chains called "shards." Each shard processes a portion of the network's transactions independently, spreading out the workload. This way, the network can handle more transactions in parallel, significantly improving throughput. Think of it like dividing a large task into smaller parts and assigning them to multiple workers, so the work gets done faster.
Proof-of-Stake (PoS) consensus mechanisms. A consensus mechanism is a protocol used to make sure all participants in a decentralized network agree on the validity of transactions and the ledger's state. PoS is an alternative to the energy-intensive Proof-of-Work (PoW) consensus mechanism. Instead of relying on miners solving complex puzzles for the right to provide consensus, PoS selects validators based on the amount of cryptocurrency they hold and are willing to "stake" as collateral. This drastically reduces the computational power needed to secure the network, leading to faster transaction processing.
Hard forks. A hard fork is a major change to a blockchain’s protocol that is not backward-compatible. In some cases, hard forks are used to add features that improve scalability. For example, Bitcoin Cash was a hard fork of Bitcoin, and it introduced a larger block size to handle more transactions per block. Hard forks create two separate chains and can be contentious, but they allow for significant protocol upgrades.
Layer-2 solutions build on top of the existing blockchain without altering its base layer. These methods handle transactions off-chain, reducing the load on the main blockchain and improving scalability.
Sidechains. Sidechains are separate blockchains that run alongside the main blockchain. Assets can be transferred between the main chain and the sidechain, allowing transactions to be processed on the sidechain without burdening the main network. A popular example is the Liquid Network, a Bitcoin sidechain that enables faster transactions for trading and other financial applications.
State channels. State channels allow users to conduct multiple off-chain transactions, recording only the final state on the main blockchain. For instance, two parties could engage in thousands of transactions within a state channel (like payments in a game or a business transaction), but only the final balance is submitted to the blockchain. This reduces the number of on-chain transactions and improves speed.
Nested blockchains. Nested blockchains are smaller blockchains built on top of the main blockchain. These blockchains operate independently but still rely on the main chain for security. Each nested blockchain can be customized for specific applications, while the main chain acts as the final authority, ensuring trust and security.
Plasma. Plasma is a framework for creating child chains that periodically commit their state to the root (main) blockchain. The child chains handle most of the transaction processing, while the main chain verifies and stores only essential information. This allows for higher throughput by offloading work from the main blockchain. Plasma was originally proposed as a solution for Ethereum’s scalability challenges.
Rollups. Rollups are a popular Layer-2 solution that bundle many transactions into a single batch. These transactions are executed off-chain, and only a summary or proof of the transaction batch is posted to the main blockchain. Rollups come in two types: optimistic rollups and zero-knowledge rollups (zk-rollups), both of which reduce the workload on the main chain while maintaining security.
Another approach to blockchain scaling is simply improving consensus. Traditional Proof-of-Work (PoW) mechanisms are slow and energy-intensive, so alternative consensus methods have been developed to boost performance.
Proof-of-Stake (PoS). As mentioned earlier, PoS selects validators based on their staked cryptocurrency, which is faster and less energy-intensive than PoW. Ethereum transitioned to PoS for greater scalability.
Delegated Proof-of-Stake (DPoS). DPoS takes PoS further by allowing token holders to vote for a small group of validators who are responsible for securing the network. This reduces the number of participants involved in each round of consensus, speeding up transaction times without compromising security. EOS uses DPoS to scale its blockchain.
Practical Byzantine Fault Tolerance (PBFT). PBFT is a consensus algorithm designed for faster decision-making by reaching agreement among nodes even when some of them act maliciously or fail. It works well in permissioned blockchains where the number of validators is limited, providing high throughput and low transaction latency.
All in all, these approaches to scaling blockchain networks focus on either optimizing the base layer (Layer-1), building additional layers on top (Layer-2), or improving the way consensus is reached. Each method addresses the blockchain scalability challenge in different ways, pushing the technology toward mass adoption and efficient global use.
Protocol upgrades and optimizations are being developed to overcome the blockchain scalability problem. Solutions like increasing block size, adopting Proof-of-Stake, and leveraging Layer-2 technologies such as rollups and sidechains pave the way for more scalable and efficient blockchain networks. Hybrid approaches integrating Layer-1 and Layer-2 scaling methods can enhance performance even more without compromising security or decentralization.
Hedera is the only public ledger that uses hashgraph consensus, a faster, more secure alternative to blockchain consensus mechanisms. Hedera Hashgraph efficiently verifies transactions while ensuring the tightest security to prevent malicious attacks. With its innovative gossip about gossip protocol and virtual voting, Hashgraph achieves high-throughput and low-latency finality in seconds.
Hedera's robust codebase ensures massively scalable and reliable network infrastructure, making it the perfect platform for developers to deploy ecosystem-critical web3 applications and protocols. Not only does Hedera provide scalability, it enables developers to create massively scalable applications and protocols.