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.


Blockchains don’t scale. Not today, at least. But there’s hope.


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.


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.


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.


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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From Bitcoin to Smart Contracts

Bitcoin created a decentralized monetary system which can transfer money from one person to another. That only allowed for monetary transactions, there was no way to add conditions to those transactions: 

Alice can send Bob 5 BTC, but she couldn’t tell Bob that he will get the money only if he performed certain tasks.

These conditions are a smart contract: self-executing with specific instructions written in its code which get executed when certain conditions are made.

Say Alice wants to buy a house. The seller will receive the funds only if property rights are cleared and after the rights have been transferred over.



What is Ethereum Gas? [The Most Comprehensive Step-By-Step Guide Ever!]

The Proof of work concept existed even before bitcoin , but Satoshi Nakamoto applied this technique to the digital currency revolutionizing the way traditional transactions are set.

In fact, PoW idea was originally published by Cynthia Dwork and Moni Naor back in 1993, but the term “proof of work” was coined by Markus Jakobsson and Ari Juels in a document published in 1999.

But, returning to date, Proof of work is maybe the biggest idea behind the Nakamoto’s bitcoin white paper – published back in 2008 – because it allows trustless and distributed consensus.



Proof of Work vs Proof of Stake: Basic Mining Guide

A world computer & a settlement layer

Ethereum is a “world computer”: It lets people build apps & products with money baked into the code. If you believe that web3 is going to continue to grow, then you likely believe that over time,

Ethereum will become the “settlement layer” of the internet: All sorts of transactions (whether on-chain or even Visa) will turn to Ethereum to exchange funds and keep secure, immutable records.

Owning ETH is like owning shares on the internet. Demand for ETH will go up with increased web3 adoption, while upcoming changes will decrease the supply of ETH and let more value accrue to holders.



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