What is Blockchain Scalability and Why Does it Matter?

by | Sep 2, 2022 | Blockchain, Blog

For users intending to invest or learn about NFTs and cryptocurrencies, there is a plethora of options to choose from in terms of blockchains. Each blockchain has its own advantages and disadvantages, such as different prices for transactions or NFT coining. One of the most important elements that define the efficiency and long-term stability of a network is blockchain scalability.

What Does Scalability Mean?

When talking about software and tech,  the term scalability refers to the overall increase or decrease in performance that a system gets upon applying certain changes or inputs. For instance, when a hardware system gets more users, it will almost inevitably take a toll on its performance.

If the system is able to maintain a certain level of performance with a higher number of users, we say it’s more scalable, but if each new user decreases performance significantly, that means it’s less scalable.

Other examples of scalability include the ability to withstand a large increasing number of queries in a database or operating systems being able to perform in multiple different types of hardware. In other words, scaling means a system being able to grow and expand while remaining functional and reliable.

What is Blockchain Scalability?

Anyone who has done a certain degree of research about the different blockchains will surely have come across the term blockchain scalability. 

As stated before, scalability is the ability of a system to expand without a loss in performance. For blockchains, this means being able to have an increased number of users and transactions while maintaining performance and not significantly increasing energy costs.

Because blockchain is a decentralized network of transactions made to register and distribute a ledger of those transactions, it is essential for any blockchain to be programmed with high scalability in mind. As more transactions are carried out within a blockchain, the information registered and distributed increases exponentially, thus, requiring more processing power and more nodes. 

In the case of blockchains such as Bitcoin and Ethereum, emitting new tokens requires solving increasingly complex math problems in a process known as mining that requires extremely high amounts of computing power and thus, very high amounts of energy. 

This is another process in which scalability plays an important role, as the way in which these math problems are developed and tackled is going to largely determine the potential of a blockchain to grow in terms of operational costs and logistics.

The ultimate way to measure scalability in the blockchain is in terms of how many transactions per second (TPS) can be carried out and how much energy each transaction takes. This will largely determine whether the blockchain can provide a viable financial solution and be able to make its token into a functional global currency.

If a blockchain isn’t scalable enough, there’ll be a point where its performance won’t suffice to support a large number of users and simultaneous transactions.

Most Scalable Blockchains

Although scalability can be one of the most important factors for a blockchain’s sustainability in the long term, many newcomers would be surprised to know that the largest current blockchains like Ethereum and Bitcoin aren’t necessarily the most scalable. A list of some of the most scalable include:

Cardano

With a talented development team behind, constantly updating the blockchain, and increasing the number of nodes that each network participant can run, Cardano is one of the most scalable blockchains at the moment. 

Although the platform currently supports a relatively modest volume of 250 TPS, its architecture allows it to have a much higher number in theory. With an upcoming update known as the Hydra upgrade, it’s expected that it could carry out up to 1’000,000 TPS.

Avalanche

Currently one of the biggest smart-contract-based networks, Avalanche supports a plethora of dApps and other decentralized financial networks. The flexibility for which this blockchain is known has very much to do with its scalability, which currently allows it to handle 4,500 TPS.

Although other blockchains might sport higher TPS, Avalanche’s speed makes that number that much more impressive. To put things into perspective, Bitcoin and Ethereum can only do 7 and  14 TPS respectively, with each transaction taking about an hour throughout its whole validation and settling process.

Solana

Perhaps the most promising blockchain when it comes to Scalability, Solana is generating more hype the more people use and explore it. Not only is Solana able to handle 50,000 TPS as of today (twice as many as the Visa system), but it’s also the most environmentally friendly blockchain.

Being an environmentally-friendly blockchain is no small feat, and it’s largely due to its genius programming and optimization, which makes each Solana transaction require less power than sending an email or making a Google search. Thus, this blockchain has enormous potential for growth.

The Blockchain Trilemma

Part of the reason why blockchains do not solely focus on achieving higher scalability is a problem that’s commonly referred to as the blockchain trilemma

In simple terms, the three most important factors in the effectiveness of any blockchain are security, scalability, and decentralization. Ideally, we would like to maximize each of these variables to their fullest potential. The problem is that increasing one of them, usually requires sacrificing the other two.

A highly scalable and secure blockchain usually requires a degree of centralization to work properly and have the necessary fail-safes to guarantee a secure experience for a large number of people. A highly decentralized and scalable blockchain tends to have security problems. A highly decentralized and secure blockchain isn’t as scalable because it takes a lot of resources to operate.

Why Does Blockchain Scalability Matter?

The ultimate goal of any blockchain is to provide a worldwide interconnected decentralized network for transactions, with its own functional globalized currency. This, of course, implies that millions or even billions of people should be able to use it effectively and efficiently.

As more people start to open wallets and make transactions in any given blockchain, a lack of proper scalability could lead it to reduce its efficiency, making transactions slower and more costly and henceforth defeating part of the purpose of having a decentralized network.

Some of the most popular blockchains, which were also the first in the market, are already starting to show some problems related to scalability, with transaction costs and times that do not compete with those offered in mainstream financial services.

Thus, high scalability isn’t just important to those aiming to invest in a certain blockchain, but also, especially for those who see blockchain as a real alternative for efficient and secure financial services.

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