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The need for blockchain scaling solutions has emerged as a new phenomenon. Ever since blockchain development came into the picture, it has undergone many technological advancements. However, after multiple updates and upgrades, the blockchain still lacks faster transaction speeds.
Also, it is not able to handle a large volume of transactions quickly, and that’s the major issue with blockchain. This phenomenon of managing multiple transactions is called ‘Blockchain Stability,’ and it is yet to achieve its maximum potential.
The speed of crypto transactions is not as fast as that of traditional payment methods.
But why is scalability a challenge in blockchain networks? Let’s find out!
With blockchain scaling solutions, you can unlock faster transaction speeds and improve security. Increase your blockchain performance and eliminate slow transaction processing times. Contact us and get started today!
Blockchain trilemma includes three major scalability issues with blockchain. The trilemma is the idea that it is extremely hard or challenging to simultaneously achieve three important features of a blockchain system-
As per the Blockchain Trilemma, a trade-off among the above three is essential to improve scalability. In other words, an increase in scalability brings a downfall in security and decentralization levels.
It is important to note that sole scalability enables blockchain networks to compete with centralized platforms.
(With a focus on the second point), is it possible to develop blockchain scaling solutions without compromising security and decentralization? Let's find out!
It has already been established that scalability is the primary barrier to blockchains. These challenges in the blockchain networks include-
Blockchain’s primary concerns are its limited transactional volume and latency in processing transactions quickly. Why do these restrictions occur? Such restrictions occur when a blockchain network cannot process an adequate number of transactions.
This leads to slower confirmation and processing times and higher fees.
Several conventional and pioneering blockchains like Bitcoin and Ethereum face scalability limitations due to their ineffective designs.
Such blockchain networks use concurrent mechanisms that require every participant to check and record every transaction. Scalability issues occur when the number of nodes and transactions increases.
Though it validates decentralization and higher security, it increases latency in the transaction volume, thus increasing congestion and transaction fees and delaying confirmation.
Bitcoin and similar blockchain networks have scalability issues due to their limited block size. A smaller size decreases the number of transactions recorded on a single block.
It results in increasing confirmation time. Bitcoin's present potential is only 7-10 transactions per second (TPS), which is less than traditional systems like VISA, which can handle hundreds or thousands of transactions in a second.
From sharding to consensus algorithm optimization, we create functional Layer-1 scaling solutions to improve the blockchain's overall functionality. Contact us today for a blockchain scaling solution.
Every problem has a solution. Multiple blockchain scaling solutions can greatly help improve the overall functionality of blockchain networks!
Let’s find them out!
Implementing a Layer-1 solution is a more direct approach to addressing blockchain scalability challenges. When other functions deliver zero results, this method comes into play. It addresses building a new and highly efficient blockchain.
Such solutions include innovative technologies like sharding and advanced consensus mechanisms to improve transaction processing and network congestion. Layer-1 scaling solutions also include security protocols and decentralization practices.
Example - Avalanche uses an advanced consensus mechanism for balancing scalability, security, and decentralization (three significant blockchain pillars).
Consensus algorithm optimization plays a vital role in improving Layer-1 scalability. Gone are the days of conventional mechanisms like Proof of Work (PoW), which require resources like block validation and offer limited scalability.
Switching to more efficient and latest consensus algorithm optimization mechanisms like Proof of Stake (PoS) or Delegated Proof of Stake (DPoS) can improve scalability. How exactly?
It reduces the overhead costs associated with block validation.
Sharding is a process of dividing the blockchain network into smaller, easy-to-manage segments called Shards. Each shard has independent operations to process a subset of transactions.
This simultaneous processing improves transaction throughput, enabling the network to manage a heavy transactional volume.
SEGWIT, or Segregated Witness, is an extra contribution to blockchain scalability besides the other Layer-1 solutions. SEGWIT enhances the protocols present within blockchain networks.
The purpose of this enhancement is to modify the structure and method of data storage. It improves the elimination of signature data associated with each transaction, further increasing storage and transaction capacity.
Digital signatures validate the sender's ownership and current currency availability, covering around 70% of the transaction space. Removing the digital signature creates more space to add new transactions.
A hard fork is a set procedure that modifies the basic and structural properties of a blockchain network. Hard forking a blockchain increases the block size or reduces the time needed to produce a block.
Though hard forking is a prerequisite for layer-1 scaling solutions, practicing problematic hard forking brings favorable changes and hence becomes a productive option. The problematic hard fork creates a divide in the larger blockchain, reducing the transactional load and improving overall performance.
Layer-2 solutions stand above the Layer-1 protocol and improve scalability by managing transactions off-chain or through secondary protocols. These solutions work without modifying the core blockchain architecture.
Let’s check out the major types of Layer-2 scalability solutions as follows-
Rollup solutions process transactions off-chain and record them back to the primary chain in batches. Their primary motives are decreasing transaction fees and increasing transaction speed.
These solutions process transactions other than the main chain for more prompt action and then post "rolled-up" transactions back to the main chain to process as a single input. This action provides higher transaction throughput, making transactions quick and less costly.
Rollup solutions are divided into two categories-
Example - Arbitrum is a fine example of a roll-up solution which improves transaction throughput and reduces fees while maintaining Ethereum’s security.
Blockchains face issues related to payment transfers, especially cross-border payments. Cryptocurrencies bring speed and affordability to ensure rapid, low-cost, and easy cross-border transfers. Enabling crypto Layer-2 solutions ensures quick and secure payments.
Crypto remittance solutions provide real-time settlements in any currency, delivering money instantly, whatever the location is.
However, there is one downside to using crypto payment solutions—it compromises decentralization. Despite this, remittance solutions are perfect for financial institutions and banks.
Example - XRP is a perfect solution for high-speed and cost-efficient solutions for multiple global transfers and a great choice for financial institutions that want to modernize international remittances.
These independent chains are replicas of the main blockchain and work like rollup solutions by offloading transactions. Sidechains handle transaction volume differently and independently, which frees space and increases the speed of the main chain.
Since these use their own consensus mechanisms, it is not necessary to send the transaction data back to the main chain. Sidechains are more independent than the Rollup solutions and more flexible than the main chain.
Why are sidechains the most widely adopted crypto Layer-2 solutions? They act as the perfect middle ground between two solutions. Also, sidechains allow the user to experiment with the latest features and get quick confirmation time and lower transaction fees.
Example - Polygon blockchain is a combination of Layer 2 and Sidechain technology that enhances Ethereum's scalability by using a mix of sidechains.
It acts as a facilitator between different blockchains by ensuring smooth communication and asset transfer. Interoperability works like magic for the blockchains that run in silos. Such blockchains have an exclusive ecosystem, isolated from other innovations occurring in other chains.
All the transactions happening within must occur in the main network, further increasing the load, congesting the network, slowing transaction times, and increasing fees.
Interoperability makes it possible to break these silos and share the transactional load across multiple interconnected networks.
Example - Cosmos aims to create an Internet of Blockchains, which lets a network of blockchains communicate with each other in a decentralized way.
It is one of the renowned examples of off-chain Layer-2 scaling solutions for blockchain. It exploits smart contract functionality by using private and off-chain channels on the primary blockchain network. Off-chain channels offer faster and more cost-effective transactions.
Specifically, by transferring transactions from the mainchain, the Lightning network reduces the transactional load on the mainchain. Thanks to this solution, users no longer need to pay mining charges or wait for block confirmations.
Aim to achieve the maximum potential and thrash the blockchain trilemma with functional Layer-2 scaling solutions.
Considering the usefulness of the Layer 2 solutions, these are used numerously in various domains. Let’s check them out in detail!
Multiple Layer-2 solutions for crypto enable quick and low-cost heavy and micropayments, streamlining daily transactions and implementing new use cases like payment processing.
Layer-2 scaling solutions deliver a scalable infrastructure for blockchain-based gaming and NFT marketplaces. These solutions enable seamless in-game transactions and reduce the cost of trading and minting NFTs.
Layer 2-based DEX solutions offer-
Layer-2 blockchain solutions for scalability set the base for improving the scale and usage of DeFi applications. They allow for prompt and cheaper lending and borrowing transactions. These solutions also apply while yielding farming protocols.
An application that manages sensitive user data, such as patient record management or supply chain tracking, requires strong privacy mechanisms to safeguard users’ confidentiality and integrity. Layer-2 solutions like zk-rollups help achieve this.
The importance of blockchain scalability solutions lies where blockchain networks become inefficient and complex. Let’s dig a little deeper to understand.
Scalability defines a network’s potential to manage high transaction throughput. It is also the primary factor for reducing network disruptions. The higher the scalability, the lesser the network disruptions.
Though blockchain technology is widely adopted, it does not affect the regular functions of the blockchain platform's scalability. Blockchain networks with higher congestion have weak scalability due to large data processing.
Transaction throughput refers to the number of transactions that a system can process in a particular time period - the faster, the better! It is the prime reason why blockchain systems needs scalability solutions. Multiple blockchain scalability solutions like Rollup aid in increasing transaction speed.
Due to stagnant scalability levels, blockchains face a higher transactional load, increasing the fee per transaction. Scalability options come to the rescue, managing the workload and decreasing the transaction fee.
None of the users want to use a blockchain with slow transaction speed, the transaction cost is higher, and all such factors decrease the user experience. Scalability solutions, on the other hand, provide foolproof solutions to increase the user experience by imposing sharding, sidechains, and rollups.
It is evident that a blockchain with higher transaction throughput, lower transaction costs, and a great user experience would have a wider user base. That’s all possible because of scalability solutions.
A coin has two sides; the same goes for Layer-2 blockchain solutions for scaling. However, developing and implementing these solutions has its own challenges.
With efficient methodologies and reliable development practices, Suffecom Solutions implements the following solutions to tackle the challenges with Layer-2 scaling solutions-
Layer-1 and Layer-2 scaling solutions offer unique approaches to addressing blockchain scalability challenges. Here’s a comparative analysis of their key characteristics:
| Basis of Differentiation | Layer 1 Scaling Solutions (On-Chain) | Layer 2 Scaling Solutions (Off-Chain) |
| Scalability | Increases scalability by improving base layer protocols | Transfer transactions to the secondary layers while maintaining the security |
| Transaction Processing | Processes transactions directly on the main blockchain; this increases the workload | Processes transactions off-chain for quicker operations. |
| Security | More secure, as it relies on the base blockchain | These solutions have weaker intermediate security |
| Complexity in Implementation | Complex; due to changes in blockchain’s core protocol | Easier to implement, as the main blockchain remains unaltered |
| Decentralization | Highly decentralized | Partially decentralized |
| Transaction Fees | Higher | Lesser |
| Transaction Throughput | Limited throughput | High throughput |
| Network Congestion | Highly congested due to high demand and slower processing times | Reduces congestion due to off-chain recording |
| User Experience | Slow and expensive | Faster and cheaper |
Deliver maximum user experience with reliable blockchain scaling solutions. Connect with our experts and witness the change!
Following are the factors that help to choose the right solution type among Layer-1 and Layer-2 blockchain solutions for scaling-
Scaling solutions play a significant role in overcoming the scalability challenges blockchain networks face. As the demand for blockchain technology is increasing across multiple industries, the demand for reliable, scalable solutions is becoming more urgent.
Be it Layer-1 or Layer-2 scaling solutions for blockchain, Suffescom Solutions provides the best-in-class solutions to improve overall blockchain performance. We follow agile methodologies in developing solutions for various functionalities.
Suffescom Solutions Inc. is here to fulfill the demand for growing blockchain scaling solutions. Connect now!
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