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Dapp developers continue to push the boundaries of blockchain technology through the introduction of innovative scaling solutions. These ingenious creators leverage every possible method nowadays to ensure their networks can handle the pressure and congestion of today's digital economy. Keeping your blockchain scalable is no easy task when you have billions of transactions occurring.
The Varied Approaches
Methods to ensure sufficient scaling are varied in nature, from tweaking source codes to stacking one protocol atop another. With that in mind, here are the top 10 scaling solutions for blockchain networks.
New Consensus Mechanisms
On the top of the list is the introduction of new consensus mechanisms. It's rare to see proof-of-work blockchains like Bitcoin or Ethereum V1. These systems remain highly secure but often lack the performance of today's most advanced blockchains. These options do away with PoW and miners and replace these tasks with staking protocols.
Staking features enable users to lock their tokens in network wallets to secure the network. This process is simple and provides passive income to network users without the need to purchase expensive mining rigs or learn new technical skills such as programming. PoS networks are more popular than ever because they often offer better transactions throughout and require far less energy to operate.
PoS networks continue to evolve, and today DPoS Delegated Proof of Stake networks are a popular option for traders to consider. These systems lower the staking requirements by enabling users to delegate their tokens to those staking. This approach improves performance by reducing the number of nodes needed to finalize transactions. Notably, it's common for these systems to leverage vetted nodes to offset the lower decentralization.
Layer 2 Protocols
Layer 2 solutions are among the best ways to improve a network's performance without altering the network directly. The main thing to understand about layer 2 solutions is that they are separate networks that are designed to enhance the performance of other blockchains. Protocols like the Lightning Network on Bitcoin and FUEL on Ethereum have helped these giants remain viable options.
The best layer 2 solutions leverage layer 1 for security while migrating computation and transactions temporarily off-chain. This structure reduces main net congestion. The most common type of layer 2 solutions are sidechains and payment channels.
Side chains are designed to run parallel to a layer 1 solution. They will usually handle tasks like smart contact execution while leaving validation to the layer 1 nodes. Payment channel layer 1 solutions like the Lightning Network introduce direct gateways that offer unlimited low-cost transactions with the data posting to the main net after the channel closes.
The downside to layer 2 protocols is that many reduce decentralization due to their structure. For example, the Lightning Network reduces Bitcoin's decentralization by using centralized channel operators. Channel operators can permit your funds to flow through them which is far more centralization than the Bitcoin mainnet.
When a development community can't decide how to improve performance it can sometimes lead to a hard fork. A hard fork is a complete change in the network programming which requires nodes to abandon the original network and download new software to begin communicating with a new network. The requirement to stop mining the old blockchain has made hard forks a controversial and often challenging process for a blockchain community.
A platform may choose to hard fork for many reasons including performance, security, or functionality. Notably, one of the most famous hard forks was the Bitcoin Cash fiasco. The Bitcoin community went to battle over altering the 1MB block size. The debate got so heated that the community eventually split with those in favor of a larger block size creating Bitcoin Cash and those who opposed it remaining Bitcoin core.
This style of the hard fork has become less frequent as projects have introduced a variety of strategies to prevent such controversial splits. One of the main techs in use to prevent this today is DAO (Decentralized Autonomous Organizations). These protocols allow the community to put forth proposals and vote on what changes to implement.
ZK technology enables users to verify ownership of certain assets or information without disclosing their identity or further details about the owned item or account. Zero Knowledge, the name of the protocol, references its added privacy controls. Whereas, the term roll up refers to how this protocol combines transaction data into a single block.
This maneuver reduces congestion on the mainnet considerably. The main advantage of ZK-rollups is added scalability without sacrificing security or decentralization. ZK-roll-up-equipped scaling solutions provide a minimal amount of data to the mainchain just to ensure validity and authenticity.
Special smart contracts are tasked with rolling up the data. The original ZK roll-up networks would send very compressed data to the mainnet. This style of roll-up keeps computations on the layer 2 network which enables higher performance without sacrificing security. Also, this approach has proven to be an excellent way to increase throughput using layer 2 solutions.
Another popular form of roll-up tech used today is optimistic roll-ups. These systems function like their predecessors except they roll up the data assuming that the information is correct. From there, there is a period where any node can challenge the data in the block.
Optimistic roll-ups offer some major advantages because of their faster scalability and capabilities. They can handle advanced smart contract computations as well. In comparison, traditional roll-ups are restricted to basic smart contract functionality. Currently, Optimism and Arbitrum are the two top scaling solutions leveraging this technology to great effect.
Sharding is a popular method of improving scalability on business databases and has recently found a home in the blockchain economy. The term sharding was created by Google to describe their Big Table product structure and features. The term sharding refers to breaking databases into smaller sizes and storing info in multiple locations.
The best analogy to explain how this works is to think of a mirror broken into shards. Each shard is stored on a separate server which improves scalability by enabling computations and data to operate and scale linearly. This solution has helped to solve the problem of ever-growing databases and the added time it takes to queue them.
Sharded networks can compute applications in parallel which makes it much faster than single computing options. Multiple blockchains are using this technology currently. The main drawback to sharding is a reliance on additional off-chain resources to maintain the network.
Segregated Witness (SegWit)
The concept of using Segwit to scale Bitcoin entered the market in 2015. The scaling solution was introduced by Blockstream and saw heavy support from Bitcoin Core. Segwit (Segregated Witness) works by separating the signature data from the validation data of each transaction temporarily before adding it at the end of the transaction.
Notably, this maneuver enables the blockchain to focus computational efforts while the removed data remains separated until it's needed again after the computations. The signature or witness data removal helps to increase the amount of transactional data that can be sent within blockchain blocks.
The Segwit upgrade was designed to improve Proof-of-Work networks like Bitcoin. The upgrade also enabled the integration of the Lightning Network, which further reduced Bitcoin congestion. Today, Segwit is a core protocol for Bitcoiners globally. Interestingly, the added room created by the upgrade has led to new functionality for Bitcoin in the form of BRC-20 tokens.
The future of Blockchain could be modular. To understand why modular blockchains are so important you need to understand the difference between monolithic networks and modular. A monolithic blockchain is your traditional network that seeks to handle all the main tasks on a single network.
These tasks include validation, computations, data availability, smart contract execution, and consensus. This structure means that single nodes usually handle multiple tasks such as validation and smart contract executions. The requirement of each node to validate and execute hurts the performance of monolithic networks.
Modular blockchains improve performance by removing one of these computations from the main net. In most networks, it's the smart contract executions or other advanced processes which can take up serious power and time. It can be said that Ethereum was the very first to attempt this structure as it does have a separate layer for smart contract executions called the Ethereum Virtual Machine (EVM).
Notably, there are more modular blockchains entering the market currently than monolithic options. These easy-to-create and highly useful networks are gaining popularity due to their improved onboarding process and performance. One of the main advantages that modular blockchains leverage is the use of standards and readily available toolsets.
There were many years before layer 2 solutions were available. During this time there was much debate on how a blockchain could improve performance. One of the most popular options was to increase the block size. The block size refers to the amount of data each block in the blockchain contains.
For example, Bitcoin has a 1MB block size which enables it to handle around 7 transactions per second. If doubled, the network would be able to sustain 14 tps without the introduction of upgrades or second-layer solutions. Interestingly, the Bitcoin block size debate has been an issue in the past.
The concept of increasing block size led to constant growth in these features. Even Bitcoin Cash, which was formed from a hard fork from Bitcoin that stemmed from a block size debate, saw its network hard forked for larger block sizes only months after creation. Additionally, larger block sizes reduce the number of people who have the necessary hardware to participate in the network. It's these reasons that have led many to turn away from constantly increasing block sizes.
Directed Acyclic Graph (DAG)
Another method to scale networks is using DAG (directed acyclic graph) technology. The term DAG refers to a database that instead of having the last transactions communicate with the final confirmed action, all transactions can communicate. This approach means that there are no cycles for validation. In this way, you can think of these networks more like trees than chains.
A reason why blockchain would leverage this technology is to reduce the number of blocks that don't make it to the chain. These blocks are called orphans, and they can reduce performance through congestion. Notably, as you increase the block size and times, you inadvertently create more orphans.
DAG creates a more favorable environment that reduces the creation of orphans while allowing for more scalability. Since all blocks can reference the tips of the graph, miners can reference the entire chain rather than needing to progress from the last block back. This approach is in stark contrast to the original proof of work structure but provides more performance.
Hashgraph networks aren't technically blockchains but offer the same decentralized network protections. Similar to DAG technology all network nodes communicate with each other freely rather than in a chronological order. In a hash graph network, nodes share their data with other random nodes as a way to ensure all participants gain access to the info.
The main advantage of this style of distributed ledger is the ability to create ordered transactions using verifiable timestamps without relying on third-party protocols. Additionally, these networks offer more privacy controls to users. Currently, Hedera is the main hash network operating in the blockchain sector.
Blockchains Need Scalability to Survive
Blockchain developers today understand the importance of scalability. These developers continually push the boundaries of this technology to provide better performance and features. The scaling solutions above are the most popular but not the only options. You can expect to see even more ingenious and creative solutions emerge as blockchain tech continues to go mainstream.