How can we securely scale a decentralized blockchain network?

Blockchain technology simply isn't living up to its promises right now. Claims of decentralizing the financial system and the Internet have been stopped in their tracks by one key problem: Scalability.

Distributed networks such as Bitcoin and Ethereum are well behind where they need to be, even for simple applications like payment networks. And you can forget about the global, real-time, AI-enabled applications soon to come as well. If decentralized networks are going to change the world and open up new economic opportunities, they need some serious improvements first.

Achieving scalability in a secure, decentralized network is the greatest technical challenge that the crypto industry has faced thus far.

Scaling Ethereum

A good place to start is by expanding the capabilities of one of the most powerful blockchains in the world, Ethereum.

Currently on the Ethereum network, every node checks every transaction, change, and line of code that is executed on the blockchain. This is the requirement that makes Ethereum difficult to scale. Transactions on the Ethereum blockchain must propagate across the entire network before the next transaction can go though. This provides a lot of security, but it's a huge scalability bottleneck.

Sharding

One idea to try and scale the Ethereum blockchain itself is called sharding. In computing, sharding means splitting up a database into smaller, more manageable parts. In terms of the blockchain, it means removing the requirement that every node process every transaction.

This would essentially split up the network into smaller sub-chains. Each sub-chain would have its own state and transaction history. Nodes only have to validate transactions that happen on their sub-chain, and can ignore the rest. Many shards of the network can operate semi-independently to increase transaction throughput.

Taking things off-blockchain

Another idea is to take some of the transactions and process them separately from the Ethereum blockchain. The Raiden Network is an idea that proposes to build separate "Raiden" nodes that operate alongside Ethereum nodes. They can process transactions with one another and periodically settle their state to the main blockchain. This drastically increases scalability as thousands, or even millions, of smaller transactions can be compressed into just one.

Blockchain scalability cannot actually be "solved." The blockchain trilemma states that a network can only have two of the following properties:

Decentralization Security Scalability In order to scale, Ethereum will have to trade off some level of decentralization or security. These are highly political topics and changes won't come easily.

Another key challenge to scaling blockchain platforms like Ethereum and Bitcoin are the fact that they use the blockchain data structure. That is, a sequential chain of cryptographically linked blocks. The fact that transactions have to be added in blocks sequentially is a tight constraint - Daniel spyralatos