Blockchain has arrived in the field of technology as one of the remarkable phenomena witnessed once in every decade. The benefits of blockchain technology have attracted the attention of all sectors and business owners have been quick to jump into blockchain projects immediately. Discussions about blockchain architecture in scalable solutions have recently taken center stage as more and more organizations want to capitalize on the potential of blockchain.
Blockchain technology promises decentralization, transparency, immutability and cryptographic security. Blockchain use cases in cryptocurrencies, DeFi, and optimizing supply chain operations show how it can revolutionize traditional processes. However, the limitations of scalability are becoming the main obstacles to the adoption of 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 these questions.
Unraveling the root cause of the scalability problem
The architecture of early blockchain networks like Bitcoin and Ethereum focused on decentralization and cryptographic security. These blockchain networks have not thought too much about speed and throughput, which will be necessary for mass adoption. Any blockchain solution architecture you can think of will need to address the challenge of the blockchain trilemma. It specifies that any blockchain architecture can be optimized to achieve one of three main properties. The main properties are decentralization, security and scalability.
If you want a scalable blockchain architecture, then you will have to sacrifice either decentralization or security. On the other hand, blockchain can only lay the foundation for future digital solutions 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. Thanks to these two characteristics, the Bitcoin blockchain can carry out a few transactions in a second. Therefore, solution architects must come up with solutions that completely bypass the blockchain trilemma, without any compromises.
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Redefining architecture-level scalability at the layer level
The growing demand for scalability calls for taking an ingenious approach to blockchain architecture design. Traditional monolithic approaches that hold back blockchain’s scalability potential must give way to tiered approaches. Layered approaches to scalability focus on classifying different functions that will help optimize distinct layers for specific tasks.
Layer 1 Scalability Solutions
Layer 1 blockchain or core protocol refers to the actual network that helps validate and confirm transactions. You will need to make changes to the blockchain protocol itself to achieve scalable solutions at layer 1. The most promising layer 1 scalability solutions that have gained traction include upgrades to the sharding and consensus mechanism. A simple transition from proof of work to efficient consensus mechanisms such as proof of stake can improve throughput. Ethereum is one of the best examples of how you can improve scalability through upgrades to consensus mechanisms in the base protocol itself.
The next solution to achieve scalability in the fundamental layers of blockchain architecture is sharding. It works exactly like partitioning a database by dividing the entire state of the blockchain, including the ledger and transactions, into smaller parts. Smaller portions or fragments facilitate independent and parallel processing of transactions, providing the flexibility to process more transactions. Sharding improves transaction processing exponentially because each node does not need to process every transaction entering the blockchain. Therefore, you don’t have to worry about scalability of storage and transaction processing at the base layer.
Another common change in the basic blockchain architecture recommended for improved scalability is increasing block sizes. By increasing the block size, the blockchain network can accommodate more data in a single block. This helps increase throughput, although there is concern about sacrificing decentralization due to the need to require more hardware in each node.
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Off-Chain Scalability Solutions
Ideal solutions to address scalability issues related to blockchain architecture changes also include Layer 2 or L2 solutions. Layer 2 solutions operate as protocols developed on top of the base blockchain protocol. Answers to the question “What are blockchain scalability solutions?” » would indicate Layer 2 solutions as the most efficient choice. L2 solutions move much of the transaction processing tasks off the main blockchain and execute transactions faster and at lower cost.
The operation 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 may notice that Layer 2 solutions provide the best scope for innovation in blockchain architecture design to improve scalability. An overview of notable L2 solutions can offer a better idea of how they can redefine conventional notions about blockchain scalability.
The main addition among L2 solutions in terms of scalability would be sidechains, which are independent blockchains connected to the base layer. Sidechains are connected to the main blockchain via a two-way link and use their own consensus mechanism. Additionally, sidechains also use their own security mechanism, different from that of the main blockchain.
Another notable example of blockchain architecture being redefined in scalable solutions concerns rollups. You can also call them the gold standard for L2 solutions, especially on platforms like Ethereum. Rollups help execute transactions off the main chain and group transactions into a small batch. After aggregating transactions, rollups publish a summary of transaction data to the main chain.
You will find two popular variations of rollups in the blockchain space, namely optimistic rollups and zero-knowledge rollups. Optimistic rollups work with an optimistic approach assuming that all transactions in a batch are valid. On the other hand, zero-knowledge rollups rely on complex cryptography to generate proof of validity of a batch of transactions before publishing the summary to the main chain.
You can’t make a list of blockchain scalability solutions without thinking about state channels. The utility of state channels in the architecture of blockchain solutions becomes more evident in private transactions. State channels help open private off-chain communication channels between two or more users to conduct multiple transactions.
A state chain will only record the initial funding and final balance on the base chain. The most popular example of using state channels to achieve better scalability is in the Lightning Network for Bitcoin.
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Final Thoughts
The architecture of blockchain solutions suitable for scalability is very different from early blockchain designs. You may notice the growing demand for scalable blockchain solutions as blockchain adoption gains momentum across different industries. Fundamental changes in blockchain protocols, including consensus mechanism upgrades and sharding, offer effective solutions to improve scalability. On the other hand, Layer 2 solutions take a step forward and improve throughput without any changes to the base layer. Learn more about blockchain scalability and best practices for achieving it.
