Blockchain, a core technology behind decentralized data networks, has a big problem. As it became known, the crypto trilemma reflects the utopian solution of simultaneous decentralization, scalability, and security on systems that do not rely on a single entity.
For example, one could use AWS servers to host a shared register of every transaction, but then the system becomes dependent on this single entity. Amazon itself could be trustworthy, but there’s no way for users to verify it themselves.
What is Decentralization?
Ideally, it would mean that every network participant has the exact same power and that no single group can control it. However, in real life, things do not work that way as not everyone can interpret the code or have enough hashrate themselves.
Therefore, decentralization works on a scale, and there’s just no way multiple actors can have the same control in the real world. So, all one can aim is to avoid a central point of control in every possible way.
What is a Consensus Mechanism?
That’s a tricky question, as people will usually say that the longest chain, otherwise known as the “Nakamoto consensus algorithm,” is the answer when in doubt of competing blockchains. However, there’s an ultimate social layer involved.
For example, when Bitcoin’s CVE-2010-539 inflationary bug was discovered in 2010, there was effectively a rollback. A similar action took place after the Ethereum DAO hack in 2016, where the community decided to ignore a specific chain of data regardless of its accumulated proof of work.
Therefore, even for the networks relying on processing power – known as hashing – to validate new blocks, the final decision stands with the users.
Is it Possible to be Both Scalable and Secure?
First of all, one needs to understand that security involves more than defending from attacks, such as miners’ collusion or bugs. Once a transaction is included in the next block, how sure can one be that it will not be reverted? The double-spend problem is by far the largest concern of blockchain networks.
Proof of stake blockchains, despite not using miners’ hashing, faces the same issues. A small group of validators, or a malicious entity that rented out enough voting power, might insert transactions otherwise unauthorized. Then what? The community will likely have to roll back as soon as the word gets out.
Are Layer 2 Networks a Scaling Solution?
Let’s say that NYC and London only had one airport each, and their capacities were overwhelmed. Now imagine that to expand those, it would require to buy (expensive) land around it and demolish buildings or essential roads. Indeed, the community might vote and decide that those issues and costs weigh less than the benefits of a larger airport.
However, if that’s not the case, or at least it is far from consensus, the best way should be building secondary airports. The solution is not ideal, as empty plots are usually located 40 to 60 minutes away, but at least there’s an almost immediate and viable option to expand landings and takeoffs.
That’s what Lightning Network proposes for Bitcoin. Flights that require the safety of a larger runaway will continue using the main airport. However, smaller planes or alternative routes could survive doing mainly flights on secondary airports. Despite being less safe, it’s an option, and those aiming for lower costs can continue flying.
There’s no right and wrong, and everything in crypto is an experiment. Having said that, one should not make investment decisions solely based on some network upgrades.