Blockchain Scalability Explained.


Blockchain is a technology that is very resistant to cyberattacks, as hundreds of thousands of nodes must be compromised in order to acquire network control. However, this brings a major problem; transaction processing speed is greatly reduced, and, ultimately, blockchain scalability is compromised.

Although blockchain has presented itself as one of the leading technologies of digital and financial transformation in the next few years, blockchain has a major problem: the inability to scale effectively.

However, blockchain runs on a very efficient system in the sense that all transactions can be viewed in real-time.

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Why is blockchain so sluggish?


Anyone can mine on the blockchain. Additionally, only one block can be created per time. Once the block is created, other miners will take time to validate it. Moreover, the maximum size of each block is limited. This greatly affects the scalability of blockchain.

Bitcoin releases a new block every ten minutes. In addition, the maximum block size is 1 MB. Therefore, if there are more transactions, they must wait an additional 10 minutes. Thus, the confirmation time is proportional to the number of transactions.

Despite this issue, miners will attempt to add transactions with bigger fees, as there is no maximum fee amount. Therefore, delay those with low rates, as the miners are the recipients of the transaction fees. Therefore, when a significant volume of transactions is conducted, higher costs must be paid for speedier confirmation. And it makes no sense for a cryptocurrency to demand excessive transaction fees.

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Ethereum has a faster lock time, however. Every 15 seconds, a new block is created on average. Additionally, there is no block size limit. In any case, there is a cap on the total transaction costs for each block. In other words, the miner is permitted to include as many transactions as possible in a block, so long as the total fees generated by these transactions do not surpass a certain threshold.

Proof of work is an issue that contributes to blockchain scalability problems.

What is proof of work?


To publish a block containing transactions, the miner must expend a specific amount of computational power. Typically, this requires solving a difficult mathematical problem.

When the miner issues a block containing a solution, other miners verify it.

Proof of work is a fantastic method for maintaining the blockchain’s health and decentralization. However, this is also a hurdle to faster transaction processing because it requires a lot of computational power; hence, the process consumes a lot of energy. Miners with larger computational power have the advantage when it comes to proof of work.

For blockchain networks to compete with traditional payment processing systems, they must be highly scalable. Bitcoin and Ethereum networks, for instance, can handle between 5 and 30 transactions per second (TPS). On the other hand, Visa’s electronic payment network can process an astounding 24,000 TPS. Multiple approaches are under development to improve the scalability of these blockchain networks.

See also: Proof of Stake vs. Proof of Work Explained.

What Is a Blockchain Layer 1?


Every blockchain network has a Layer 1 blockchain as its foundational layer. It is a network that serves as an infrastructure for other protocols, applications, and networks.

Layer 1 is responsible for programming languages, conscious processes, and the rules and parameters necessary for a blockchain network to function effectively. Ethereum, Bitcoin, and Litecoin are the best-known instances of Layer 1 blockchains.

Even though all Layer 1 blockchains share some commonalities, they differ in other ways, such as:

Block validation (PoW, PoS or PoA)

• Number of blockchains in their ecosystem

• Interoperability with other networks

• Scalability

While it is possible to adapt a Layer 1 blockchain, it is far simpler to construct a Layer 2 solution on top of it. This action will have no effect on the first layer. However, it will provide customers with a number of advantages, including faster transactions and new features.

Layer One Blockchain Limitations

Lack of scalability is the greatest barrier preventing blockchains from competing effectively with traditional systems. The widespread implementation of blockchain networks like Bitcoin and Ethereum is impossible without fast transactions.

Vitalik Buterin, a Russian-Canadian programmer and one of the co-founders of Ethereum, invented the phrase trilemma to characterize the compromise required to upgrade the existing blockchain architecture. There are three factors to consider:


• Security

• Scalability

As Vitalik noted, a trade-off must be made between the aforementioned three features to improve a blockchain. Bitcoin’s creators, for instance, prioritized security and decentralization at the expense of scalability.

Possible Ways To Scale Layer 1 Blockchains

There are multiple options for scaling Layer 1 blockchains. The first is sharding, which divides the task of validating and certifying blockchain transactions into little pieces. This makes the procedure significantly simpler to manage.

The second is Proof of Stake (PoS). Proof of stake is an alternative consensus technique aimed at replacing resource-intensive mining. Currently, Ethereum is transitioning from a proof of work (PoW) blockchain to a proof of stake (PoS) blockchain.

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The Future of Blockchain Layer 1

Bitcoin networks can only compete with established financial systems if they are scalable. A dependable network must be able to accommodate expansion in terms of transactions, users, and other characteristics. There is an entirely new generation of Layer 1 blockchains, such as Solana, which tries to resolve the scalability issue.

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