What Is the Blockchain Trilemma: Why Bitcoin Choose Security and Decentralization over Scalability

June 8, 2021 - Expert Commentary

Bicoin Trilemma

Bitcoin founder Satoshi Nakamoto chose to be mysterious. 

On the contrary, Ethereum founder Vitalik Buterin is arguably the face of crypto. The blockchain prodigy is famous and has a robust online presence. 

He has his view of the crypto world, and with Ethereum only second to Bitcoin, and loads of smart contract platforms, he has made his mark. 

He holds philosophical influence in the blockchain sphere. 

Buterin came up with the phrase “blockchain trilemma” to capture the operational choices that blockchain platforms face. These choices become challenges for developers who feel like they have to compromise on some strengths to advance others. 

The Three Aspects of the Trilemma 

A trilemma loosely borrows from the word dilemma. It refers to a situation where a person has a tough choice among three.  Here are the three prominent aspects of public blockchains:

  1. Decentralization-decentralization means that a blockchain does not have centralized control. 
  2. Scalability- The ability of a blockchain to handle an ever-increasing amount of transactions.
  3. Security- the ability of a blockchain to withstand attacks, bugs, unforeseen issues, and otherwise operate as intended. 

In contemporary blockchain development, the goal is to create a network that checks the three boxes. However, in practice, blockchain systems have a tough task maximizing all, especially either of the first two. 

Let’s examine each of these aspects:

Decentralization

This quality is a core idea of blockchain finance. Traditional banking has centralized control. The bank has control over every aspect of money movement and is the custodian of every part of your account. 

Bitcoin came with a different promise. The era of absolute banking power was about to meet its first genuine challenge. 

Accordingly, cryptocurrencies introduced a decentralized way of issuing, storing, and transferring money. This system would eliminate the need for an all-powerful centralized entity that calls the shots. 

The blockchain is a distributed ledger that relies on network participants to work. When one participant, or a group, has disproportionate power over the issuance, transfer, or control of blockchain affairs, it undermines decentralization. 

The Permissionless ownership of assets and power to develop on the platform is vital. For decentralization, decisions should emanate by consensus, and any changes to the blockchain need approval by network participants.  

Moreover, transaction verification is a consensus approach with different mining algorithms in use. 

Once the transaction verification goes through, it cannot undergo a retrospective reversal. Therefore, transacting parties don’t place trust in a centralized entity for verification and approval. It all occurs in a decentralized manner. 

Pure decentralization, however, sacrifices speed. For a Bitcoin transaction to go through, it requires multiple confirmations for consensus. The confirmations take several minutes, if not hours. Accordingly, some platforms, in the name of more speed, water down decentralization. Luckily, Bitcoin has taken the role of an investment asset, and transaction speeds are not absolutely critical for most traders.

Scalability

Blockchain systems have to sustain transactions. 

As demand grows, the blockchain’s ability to handle more transactions is its scalability. Earlier blockchains struggled mightily with scalability as crypto got more popular in the mid-2010s. 

Cryptocurrencies that intend to be a medium of exchange need mass adoption. However, pure decentralization is an impediment to scalability when the block space experiences congestion. 

Later blockchains like the EOS and Tron blockchains focused on scalability. This blockchain emphasizes its maximum throughput, which is far higher than earlier blockchains. 

The goal is to process millions of transactions per second in the future. Blockchain systems are attempting to compete with centralized money movers like Visa and MasterCard. 

For more scalability, blockchains like EOS have a higher level of centralization. They have traded one of the founding aspects of blockchain technology for another. 

Security

The security of a blockchain system is fundamental. Transacting parties need confidence that users are operating in a secure system to transact in a trustless manner. 

Unfortunately, blockchain systems are the target of hacks and theft. The Mt. Gox Exchange hack was a wake-up call for crypto projects about the importance of security. You cannot focus on decentralization or scalability and leave safety behind. 

Therefore, blockchain ecosystems need robust source code. Most leading blockchains have open-source code. This opening is a double-edged sword because it is available to both hackers and good developers. 

Security is indispensable even as blockchain developers pursue the other aspects of the trilemma. The notorious DAO hack on Ethereum shows that even significant blockchains can be susceptible. Therefore, security and proper source code security are vital in blockchain development.

Bitcoin Chose Security and Decentralization 

There is no reason why all three are not achievable.  

A different way to look at it is that instead of being a trilemma, it should be more like a pyramid with security at the base. 

This approach makes sense for blockchain originalists. They believe that if the blockchain is susceptible to compromise, decentralization and scalability are meaningless.

Bitcoin enthusiasts come from this school of thought. The famous Bitcoin Cash fork came after a dispute over the direction of the Bitcoin blockchain. 

This hard fork meant that Bitcoin Cash increased the size of blocks, increasing the number of transactions and scalability.  The Bitcoin core team opposed this increase in block size, hence a hard fork due to the ideological split. 

The Bitcoin blockchain has a scalability problem, no doubt. However, it is easily the most secure blockchain because of the difficulty of generating blocks (once every ten minutes), robust network participation, and scarcity. 

Newer cryptocurrencies sought to improve scalability by igniting the supply afterburners.  It is common to see total supply in the billions and trillions. In the case of Ethereum, it does not have a fixed supply, with the core developer team reducing inflation gradually. 

Statistics don’t lie. Bitcoin is still head and shoulders more valuable than other cryptocurrencies. The supply cap of 21 million creates an element of scarcity that is endearing to investors. 

Accordingly, Bitcoin’s decision to stick with security and decentralization of scalability is right. Other cryptocurrencies have a core development team with disproportionate power in the supply. Bitcoin has a fixed supply, halving schedule, and randomness of block rewards to ensure that security and decentralization are at the fore. Accordingly, many more people see cause to own Bitcoin than other coins.

VBit Mining for Decentralization and Value in Bitcoin

From the aforementioned, Bitcoin has prioritized two aspects of the blockchain trilemma. 

Decentralization is fundamental because it ensures that Bitcoin is an asset that belongs to a community rather than a person or group.  

Bitcoin has the most decentralization with millions of individual miners globally.

Additionally, it has a secure source code and has not experienced an event like the DAO hack. Yes, it struggles with transaction speed, and its medium of exchange aspect lags behind. However, its value as an asset has grown exponentially in the last decade. 

Accordingly, Bitcoin mining plays a vital role in securing the Bitcoin blockchain.  

VBit Mining is an equipment reseller that enables ordinary people to participate in Bitcoin mining.

 Our direct line to Bitmain, the best Bitcoin mining rig manufacturer, allows us to source the latest powerful mining equipment. 

VBit Mining also offers hosting services to miners. Mining is power-intensive and requires constant cooling. We have data centers in naturally cool areas of North America next to cheap renewable power sources. These combine to make mining more viable than a solo enterprise. 

Visit the VBit Mining shop to get started in Bitcoin mining!

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