You are currently viewing Lightning fast blockchains: the hidden cost of the race.  |  by Serge Baudrillart |  Coinmonks |  Sep 2022

Lightning fast blockchains: the hidden cost of the race. | by Serge Baudrillart | Coinmonks | Sep 2022

Speeding can lead to crashing.

You’re surely aware that the goal of cryptocurrencies is to eventually become a strong alternative to traditional finance, thus being capable of supporting global demand — billions of transactions out of billions of people.

This requires scalability, which is part of the “blockchain trilemma”, a well-known challenge most blockchains ultimately aim to solve.

Scalability could be seen as a precious commodity, that can be traded in exchange for Security, Decentralization or both.

The Blockchain Trilemma

The goal of this article is to look at today’s main blockchains, and how much they give away at the expense of speed.

Ethereum: Everything but scalable

Ethereum’s explosive interest came with the fact that they introduced effective smart contract deployments, which led to an array of innovations from dApps to NFTs — something previously impossible with Bitcoin.

While Ethereum has become a clear reference in the ecosystem, its protocol keeps generating a lot of frustration from its users. Why?

Because its founders prioritized decentralization over scalability. Right off the bat.

And the undesired consequences for that sacrifice are multiple:

  • The blockchain supports roughly 15 transactions per second, and a block time of 13 seconds, making the network subject to clogging — which users are familiar with.
  • Lack of adaptability in periods of intense network usage.
  • Very high transaction fees (gas price) which are reflecting the demand for transaction validation.

And while everyone is impatiently for the migration towards a Proof-of-Stake (PoS) consensus called “The Merge” expected to happen this week, it isn’t really expecting to improve the network throughput, lower its current high gas fees.

This major upgrade is due for another update we cannot yet envision.

Yes, sidechains and layer-2 solutions do exist to cope with Ethereum’s huge transaction flow, it has hardly addressed inherent blockchain scalability.

What they did achieve however is reaching high levels of security, decentralization, and mass adoption. This is nothing short of impressive.

Binance Smart Chain: Centralization is the trade off.

The Binance Smart Chain (BSC) has gained rapid adoption since its launch exactly two years ago, especially from retail investors. It is considered one of the fastest blockchains as it boasts very low fees, about 160 TPS and a 3-seconds block time.

It is compatible with Ethereum dApps and main cross-chains.

Where it gets very unfortunate is that the BSC uses a specific consensus mechanism: the Proof of Staked Authority (PoSA): a centralized alternative.

This leaves the BSC with a maximum of 21 preselected validators, and only 11 required to compromise the blockchain.

This corroborates with its Nakamoto Coefficient, a metric representing the number of nodes needed to compromise a blockchain. BSC receives the low score of 7. As a comparison, Solana’s coefficient reaches 19 — the higher the number, the more it is decentralized.

In other words, the chain is able to attain such great performances by trading off decentralization.

It seems that the BSC is looking to appear as a cheaper and more scalable alternative to Ethereum, but not looking to solve the blockchain trilemma anyway.

Solana: Speeding can lead to crashing.

Of its PoS counterparts, Solana could reasonably be the fastest of all major blockchains with a rough 65.000 TPS capacity, and a very short time-to-finality.

It achieves such performances by bringing in a mix of PoS and PoH — Proof of History. This implies that each validator can align and agree on the timely sequence of entries on the common ledger to bolster the validation process.

It also does this by leveraging Neon, an on-chain application that brings interoperability with a native EVM to Solana and helps streamlining dApp integrations.

Solana has remarkable performances, but there is no free lunch — here are some of the caveats.

  1. The project experiences many aspects: at least 6 over the past year. It is in fact widely criticized for not being resilient to cyberattacks, such as DDoS attacks consisting of flooding requests to overwhelm a server.
  2. Ever paid attention to Solana’s unfair token distribution? Well, it is not as decentralized as it claims.
Messari’s report on projects initial token allocation

48% of the distribution goes to insiders, and there are only crumbs left for public sale. Compared with Ethereum, the allocation gap is striking.

The points mentioned above are a major part of the reason for Solana’s sharp decline in trust on the network, and perhaps why they will not be ones solving the blockchain trilemma.

Velas: Leveraging AI?

Launched in 2019 as a fork of Solana, Velas boasts promising performances with a TPS of 50,000+, low transaction fees of roughly $0.00001 and an extremely fast time-to-finality.

Velas has been looking to combine the best of both worlds: Solana’s hybrid scaling system and a fully EVM-compatible network that allows seamless dApp integration.

Its breakthrough to attempt solving the trilemma? Its built-in AIDPoS mechanism: a cutting-edge algorithm that combines blockchain and artificial intelligence.

Velas AIDPoS system

The AI ​​is endowed with arbitrage capacities and seeks optimal functionality of the overall network. It gauges whether performance is most needed at a given time, or security in case of an attack.

This makes the VLX network both very adaptive, and resilient to network congestion and addresses the scalability issues discussed above. Now you may ask:

“What’s the catch with Velas?”

Well, in my opinion, there are a couple snags:

  • According to Velas Validators, there are 141 current validators on the blockchain, which makes it quite centralized.
  • The AI ​​and overall infrastructure of Velas hasn’t yet stood the test of time, as it is a relatively new project.

In the competitive space of Blockchains, innovations are flowing at a pace that is difficult to follow.

These innovations could eventually save us from the burden of traditional finance and its inegalitarian set of rules.

For that, there needs to be the right infrastructure with the capacity to bear and fuel global demand without crashing or being too centralized.

In another article, I will be discussing the upcoming developments in the crypto space that could really make a difference, namely: sharding and ZK-rollups.

Please don’t forget to clap and follow for more of this content, this means a lot to me 🙏

As The Merge is about to happen, here is an article I wrote about Ethereum energy consumption analysis that you might like.

Final note:
Scalability is often overlooked as a mere achievement of high TPS (transaction per second). In fact, a blockchain with a massive throughput — eg 250,000 TPS, would be impractical should its transactions take a few days to get validated.

Blockchain scalability should rather be considered as the whole transaction processing: from the transaction request to its finality, when the transaction becomes irreversible.

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