Blockchain has revolutionised so many sectors of our economy and lives. However, the technology faces a fundamental challenge known as blockchain trilemma. As the co-founder of Ethereum, Vitalik Buterin called it, blockchain trilemma is the trade-off between the three foundational aspects of the technology, namely security, scalability and decentralization.

These three factors are significant bottlenecks to the full implementation of blockchain because enhancing one often results in suppressing the other. And for any product to be truly blockchain as outlined in the building principles, it must have all these three elements. This poses a predicament for developers and Web 3 entrepreneurs who have to settle for suppressing one aspect to improve the other two.

Despite the advancement of knowledge and technology all over the world, the blockchain industry is still divided as many believe that achieving all three components of the trilemma is impossible. We will delve into each of these trilemma and what industry players have been doing to build blockchain products that are truly secure, scalable, and decentralised.

Security: the first trilemma

Security is of great importance to blockchain technology because it is the cornerstone of user protection that the technology promises. A blockchain product must have robust defences to neutralize attacks by malicious entities that aim to seize control. This is a big conversation considering the billions of dollars and other valuable assets already hosted on blockchain networks. However, blockchain is decentralized, meaning there is no central authority to oversee and protect them and anybody, including bad actors, can be a part of the system. This leads us to the first trilemma, the possibility of forfeiting decentralization to build a very secure system.

Taking the Bitcoin blockchain for example, the system uses a complex combination of cryptography and consensus mechanism (proof-of-work) to ensure security. The consensus mechanism interconnects each block of data in a tamper-resistant manner, making any alterations to be detected by the network. The more participants in the system, the more secure it is, making it harder for an entity to gain control. Despite the strong infrastructure for security on the blockchain, it is intertwined with decentralization and scalability, and enhancing security may compromise the other two elements.

Scalability: the second trilemma

Scalability is the ability of the system to handle increasing users and volume of transactions without affecting transaction speed or fees. Given the high global adoption of blockchain projects, the networks must be built to handle billions of users. However, achieving this milestone is a challenge, because it will complicate the system’s security and decentralization.

Centralized systems like Visa can handle over 24,000 transactions per second. This is because the system is closed and does not depend on distributed control of all network users. Compare this to blockchain networks. According to Bloomberg in 2022: “As of September, Bitcoin was unable to handle more than seven transactions per second and Ethereum, the second-most popular network, was limited to about fifteen per second.” This remarkable contrast is because of the inherent design of blockchain networks where information needs to be validated by multiple participants and the consensus mechanisms are slow.

Decentralization: the third trilemma

Decentralization is the defining characteristic of blockchain technology, any project that doesn’t offer decentralization as part of its core features may not be regarded as a truly blockchain project. A decentralized network distributes control evenly among all users, eliminating the need for a central controller. This enhances the transparency and fairness of the network, making it resistant to eternal manipulation and censorship. With blockchain, the existent problem of big tech firms exploiting the data of users will be permanently solved.

Achieving decentralization comes with its challenges. As the number of participants on the network increases, reaching a consensus becomes more time-consuming, impacting the transaction speeds and the network’s scalability. Furthermore, a decentralized network can potentially become less secure because malicious players can join the network and launch attacks.

Solving the blockchain trilemma

It is noteworthy that there is no singular solution to the trilemma. Given the importance of solving the blockchain trilemma problems, there have been some popular developments with interesting results. Sharding, usage of different consensus mechanisms (like proof-of-stake), and layer-2 solutions are currently the most popular remedies to the trilemma.

Final thoughts

The complexities involved in the simultaneous implementation of the three trilemma stand in the way of blockchain fulfilling its potential as the new era of the internet. If we want a scalable system, we need to forfeit the security and decentralization of the network. Interestingly, technological advancements in the blockchain industry have espoused the continuous proposition and implementation of solutions to the trilemma.