Blockchain is becoming necessary in nearly every industry, with the ability to support many transactions simultaneously and a time frame that never stops. However, this complex network creates a variety of challenges for blockchain networks. For example, assessing scalability within the blockchain industry can be tricky. On the other hand, if you will go into trading, you may use a good crypto trading platform to avoid bigger risks.
There are several different layers to consider when looking at the limitations of this technology, including block size, transaction processing efficiency, and security. These three factors are interlinked in their effect on each other, so when one is limiting, it also affects the others. In the blockchain industry, there is a growing need for scalability.
It is because most decentralized applications (DApps) require the ability to process a large amount of data in a short amount of time. Blockchain's ability for scalability could make them more appealing than other technologies based on traditional relational databases and NoSQL databases.
Blockchain technology has the potential to solve significant problems inherent to traditional database technology, making it attractive not just to individuals but also to major corporations and institutions around the world.
Reasons behind scalability issues in the blockchain:
You can break down scalability issues into three layers; block size, transaction processing efficiency, and security. These layers are interlinked so that any limitations in one layer will undoubtedly affect the other. In the blockchain industry today, there is a need to find ways to scale the technology. It is why scalability remains one of the significant challenges for blockchain technology.
Blockchain facing criticism:
Blockchain has been criticized for its high cost and limited transactions per second (TPS). Several solutions have been proposed to solve this problem, including splitting into smaller groups or sharding. The Ethereum Foundation has proposed splitting Ethereum into two blockchains to reduce scaling issues.
Blockchain transactions are processed in blocks. When a block is produced, it is added to the blockchain by being linked to previous blocks. These innovations would enable more transactions to be stored within a single block, thereby increasing the block size and reducing transaction processing times. However, increasing transaction processing times could lead to increased orphaned blocks or forks, leading to challenges for nodes operating within its network.
Can hard fork resolve the scalability issues of blockchain?
A hard fork is an upgrade to the protocol which requires consensus from a substantial majority of the blockchain's users before being accepted. However, this “majority of users” requirement may not be met, resulting in two separate currencies sharing a standard blockchain until the point they diverge. Hard forks have been successful in the past when there was a perceived consensus from the majority of community members.
However, recent hard forks have failed unless a specific group of users can coordinate with another group to create a coordinated hard fork, known as “veto power.” It means that a single user can veto any proposed changes. For this reason, there will continue to be opposition from most users who feel that hard forks are unnecessary in today's world.
Security concerns and scaling issues:
The reliance on consensus and the lack of inherent security within blockchain transactions make them vulnerable to hacking attacks. There has been an increased interest in blockchain technology because of this problem. Because of this problem, there is the development of many new technologies meant to solve this problem. One of these methods is to make use of quantum-proof cryptography. Quantum computing could allow a malicious party to hack into public blockchains and steal cryptocurrency.
It has already happened before exploiting the ECDSA algorithm for bitcoin and ethereum, based on Proof-of-Work (POW). Miners with sufficient processing power could increase their chances of creating orphaned blocks or double-spend transactions. This vulnerability creates distrust in users regarding cryptocurrencies based on POW. However, the use of blockchain technology itself is not solely responsible for scalability issues; it's more complex than that.
Potential solutions to scalability issues in the blockchain:
Several potential solutions could improve the scalability of blockchain. An excellent example of this is the use of sharding to increase transaction TPS while reducing scalability issues. Sharding is a technology that splits data across multiple nodes to reduce reliance on a central point. As a result, the network reduces the number of resources needed while at the same time increasing transaction TPS.
The problem with blockchain is that it requires extreme amounts of computational power; it would require somewhere around 100,000,000,000 different nodes to store seven transactions happening at any given time if each transaction takes about 20 seconds for confirmation. With the average computer processing power of about 100 core-cent, it would take about 10 years for this to happen. If each node only processed one transaction every 90 seconds, there would be a block every 12 minutes. It still doesn't solve the scalability issue since an average transaction on the blockchain today takes between 10 minutes and 24 hours to confirm, depending on how large/small your transaction is.
Sharding could solve some of these issues while maintaining security. In addition, sharding allows parallel processing of transactions, which increases TPS (transactions per second) on the network overall, making blockchain technology more attractive than traditional database technology such as relational databases and NoSQL databases.