You may have read about The Bitcoin Scalability Problem, but can Ethereum scale? The main issue facing making blockchain networks is that the future is uncertain. Everything seems to work fine with the current level of usage. But what happens if everyone gets on-board?
All major tech firms, from Facebook to Amazon, have had to deal with the issue of scalability. Bitcoin and Ethereum are no different. Another problem facing the blockchain community is the novelty of the technology itself. It’s uncharted territory, and few people can predict how the future will look.
What makes scalability an issue for Ethereum?
Each block on the blockchain contains a certain amount of data. In the case of Bitcoin, that amount is 1MB. This limit means that the Bitcoin network can only process around seven transactions per second. Ethereum is twice as fast and can handle 15 transactions per second. Both systems pale in comparison to Visa’s 45,000 operations per second. The lack of scalability is one of the main stumbling blocks for the cryptocurrency.
What makes scaling difficult?
Decentralization is a blessing and a curse. The benefit is that everyone with a computer can participate in the network. You can even mine cryptocurrency like Ether with a smartphone. It won’t get you far, but it’s possible. However, it’s only possible because of the small size of the data block. The curse is that the small block sizes hamper the number of transactions the network can handle.
If the size of the block is increased, then it will require a more powerful computer to process. Increase the volume enough, and only the most powerful supercomputers in the world can mine Ethereum. That means the little guy is not able to participate in the network. That further means that the system stops being decentralized because only a handful of big companies can afford to mine Ethereum.
In other words, it would seem that you can’t have a system that is both decentralized and scalable. That leaves blockchain enthusiast in a Catch 22. If they sacrifice decentralization, they open the door for monopoly and corruption. If they sacrifice scalability, the network will eventually become unusable and abandoned. So what is the solution?
One of the proposed solutions to this problem is the method of ‘sharding’. The blockchain network currently works so that each node on the system keeps a copy of the entire blockchain. Naturally, this is only possible because the blocks are relatively small in size. Sharding, then, is the practice of breaking up the blockchain data, so that each node contains a fragment of the blockchain — a shard.
The problem with sharding is that it requires each node to trust the other nodes. Given that a node will no longer have a full copy of the blockchain, it relies on the other nodes to complete the picture. Sharding could lead to a decrease in security because transaction verifications are made more complicated.
Another solution to the scaling problem is to use off-chain transactions. This solution is similar to the Lightning Network used by Bitcoin. Off-chain transactions mean that a given transaction is not immediately recorded on the blockchain. Instead, two parties can transfer between each other using a micropayment channel without using the blockchain.
The safety measure here is that each party has the option of ending the micropayment channel by sending all the transactions to the blockchain. The general idea, though, is that it won’t happen very often compared to the current blockchain transaction records. Ultimately, off-chain transactions will free up processing power and increase scalability.