Blockchain and Scalability – What solution does Layer 2 offer?
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Security, scalability and decentralization are known in the blockchain world as one of the most challenging trilemmas to solve.
But what is “Scalability“and how does it relate to the Layer 1 solution?
This article will go through the following sections to answer this question:
- Decentralization in nature
- Scalability: a matter of logistics
- How to combine security, scalability and decentralization?
- Multi-layer structure as a means: layer 2
- To be continued – Scaling solutions video
Decentralization in nature
The cryptocurrency ecosystem is based on relentless expansion and technological innovation How computer systems store data: each transaction is stored in blocks linked together by encryption.
Improved data security, better privacy and data traceability at lower costs: For years, Blockchain technology has been committed to guaranteeing an accurate and transparent recording of the order of events without a trusted third party.
But how much will Blockchain actually be able to handle in 2022?
Is much praised decentralized structure Will Blockchain really be able to maintain this efficiency even as the complexity of networks and the number of users making transactions increases?
The capacity and frequency of the blocks are limited, which brings out a serious practical problem (known as Blockchain Scalability), which is a significant challenge going forward and requires sustainable development and mandatory antidotes.
Scalability: a matter of logistics
Imagine a long journey ahead of you with only an old worn-out car to get you through, or suppose you have a manufacturing plant but only mediocre machinery: that’s not the ultimate guarantee of reliability.
Your opportunity to grow (or in scale) well aren’t great, and if you don’t scale well, you won’t succeed!
“Scalability” refers to the ability of any program, process, or organization to manage an increasing amount of work while maintaining good performance at the same cost.
The hardware system is expected to perform at a high level even as the number of users increases, expanding its performance to new possibilities.
Instead of reducing supply, modern technology needs to add more seats to the table so that new market participants can also join the party.
How to combine security, scalability and decentralization?
However, several factors that affect Blockchain scalability are inherent, such as hardware limitations (which can hinder transaction history tracking), transaction fees, block time, and size.
A higher volume of transactions requires more sophisticated operations to complete and validate these transactions, which increases the block size exponentially and may lead to the use of fees.
The larger the block, the slower the network, which weakens the security features and changes the parameters that make Blockchain invulnerable and impenetrable as we know it.
Increasing the maximum block size and frequency does indeed improve latency on the one hand, but concentrates power under a few cryptocosm players with larger resources that defeat the original mission.
Lack of transparency can only slow down investment; slow times prevent investors from keeping pace, but above all, any corrections should not compromise the premise of diversification, which is the basis of the game.
Decentralization is a key part the scalability trilemma (dated December 2017) which Blockchain developers are trying to solve: can we maintain security and scalability without sacrificing decentralization?
Multi-layer structure as a means: Level 2
Fortunately, there is a vibrant array of options on the table to overcome this impasse, where often hybrid strategies attempt to improve scalability without compromising critical features of Blockchain.
One option is fragmentationwhich requires partitioning huge databases into smaller, more manageable databases called shards that perform faster and better.
Nested blockchains are linked but separated blockchains that are governed by the parameters given to child chains by the main chain. Even Proof of Stake (POS) protocols, which consume less energy than POW (Proof of work), are intended to simplify the validation process in Ethereum by allowing participants to create their own validation nodes, but often at the expense of security.
To clarify a bit, consider that blockchains are typically designed to be organized in different layers: Layer 1 is where the chain of blocks is formed by applying the main consensus mechanisms: POW (Proof of work).
POW securely validates transactions in the Bitcoin cryptospace by solving a random mathematical puzzle, achieving consensus and security.
This overwhelming workload on Floor 1 requires the help of a second layer that takes some of the Layer 1 transaction load to improve overall scalability and efficiency while opening new growth opportunities.
It just doesn’t Floor 2 Provides an optimal structure outside of Layer 1, tailored to the needs of the service performed, but should enhance interoperability between different platforms running different cryptocurrencies.
Video – Let’s continue with layer 2 scaling solutions
PCMag, EU Blockchain Forum, 101 Blockchains, Gemini