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Why isn’t the blockchain scalable?
Currently, all blockchain consensus protocols (eg. Bitcoin, Ethereum, Ripple, Tendermint) have a challenging limitation: every fully participating node in the network must process every transaction. Recall that blockchains have one inherent critical characteristic — “decentralization” — which means that every single node on the network processes every transaction and maintains a copy of the entire state.
While a decentralization consensus mechanism offers some critical benefits )fault tolerance, a strong guarantee of security, political neutrality, etc.) comes at the cost of scalability.
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Limiting the number of participating nodes
- Since every node is not allowed to validate every transaction, we somehow need nodes to have a statistical and economic means to ensure that other blocks are secure.
- There must be some way to guarantee data availability.
- Transactions need to be processed by different nodes in parallel in order to achieve scalability. However, transitioning state on the blockchain also has several non-parallelizable (serial) parts, so we’re faced with some restrictions on how we can transition state on the blockchain while balancing both parallelizability and utility.
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Proof of stake
Similar to Proof-of-work, Proof-of-Stake is a consensus mechanism which underpins security of the blockchain by preventing doublespend.
In traditional Proof-of-Work based blockchains, miners maintain the integrity of the blockchain data by racing to solve computation-intensive, Proof-of-work mathematical puzzles in exchange for rewards. In this regard, they help validate transactions with their CPU power, and the more CPU power you have the proportionately larger your ability to influence the network is. In Proof-of-Stake, stakeholders vote with their “dollars” instead of computing power.
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Blockchain rent
Blockchain rent is a solution that aims to reduce the amount of data that is stored on the network in order to help speed up transaction times.
With Ethereum, users pay for computational steps, memory, transaction logs, and permanent storage. While most of these are resources are paid for in a properly incentivized manner, the claim here is that storage is not.
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Decentralized storage
The basic premise here is that instead of nodes storing everything on the blockchain, they only store data that is more frequently requested locally and leave other data on the “cloud” via Swarm.
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