The problem of blockchain scalability has now become one of the biggest hurdles for mass adoption of blockchain technology. However, because of scalability challenges in blockchain, blockchain performance issues, especially slow blockchain transaction speed and high fees persists despite blockchain’s potential to revolutionize industries. In scaling public blockchains, the most challenging problems are in the consensus mechanisms in public blockchains as well as the management complexity in the growing user base.
Thus, to handle the deployment, they are exploring the way towards Scaling Layer 1 versus Scaling Layer 2. Layer 1 solutions aim to solve certain aspects of the blockchain through sharding it or lowing blockchain gas fees. On the other hand however, Layer 2 blockchain solutions seek to alleviate blockchain network congestion on the basis of onchain vs offchain scaling, such as state channels in blockchain and rollup (Optimistic and ZK-rollup).
Businesses can seek help of a trusted blockchain development company or mobile app development company to put forward the best blockchain scalability solutions. When dealing with a trustworthy blockchain app development company, it cuts down the costs involved in the development of blockchain apps and also provides superior performance. Symptoms of scalability issues can be solved by hiring blockchain developers or dedicated ones to achieve high throughput blockchain applications.
Understanding Blockchain Scalability
Blockchain scalability means how much transactions a network can process per second. Bitcoin and Ethereum are the age old developments for anyone to store values in Bitcoin and later Ethereum, however, traditional blockchains like Bitcoin and Ethereum are limited to Cap (Limit) because they depend on a very sophisticated blockchain consensus mechanism like PoW (Proof of Work).
Why is Blockchain Scalability Important?
- Faster and more reliable transaction processing
- Lower transaction fees through blockchain gas fees optimization
- Improved user experience and mass adoption
- Higher capacity for decentralized applications (dApps)
- Large scale application in forms of financial services, gaming and supply chain require a high throughput blockchain. However, blockchains have bottlenecks & delays unless scaled appropriately; performance & costs are poor.
Scalability Challenges in Blockchain
Though the technology of the blockchain has immense potential, it is hampered from wide adoption and quick efficiency by a number of scalability issues in blockchain:
1. Low Blockchain Transaction Speed
Bitcoin can process less than 7 TPS, whereas Ethereum handles about 30 TPS.
In contrast, traditional payment networks like Visa handle over 24,000 TPS.
2. Blockchain Network Congestion
The network can be clogged by high volumes of transactions leading to delays and higher fees.
It is known that the popular dApps and NFT trading platforms are slow due to congestion.
3. High Transaction Costs
The gas fees for small transactions are too big — due to high demand for processing power.
To keep cost affordable, it is important to have effective blockchain gas fees optimization.
4. Blockchain Consensus Mechanisms
It is slow and resource intensive but secure better consensus models than Proof of Work (PoW) such as Proof of Stake (PoS) are required for scalability.
5. Challenges in Scaling Public Blockchains
Public blockchains have to strike the balance between scalability, decentralization and security.
Making a tradeoff between one thing and another creates long term vulnerabilities.
Solutions to Blockchain Scalability
One of the biggest challenges of the blockchain industry is its inability to outperform blockchain networks in handling large volumes of transactions in a timely and financially viable manner. To deal with these problems, many developers and researchers have presented many innovative solutions to attaining blockchain scalability. In general, these solutions can be classified into Layer 1 and Layer 2 scaling methods, which have each one set of advantages and disadvantages.
Layer 1 Scaling (On-Chain Scaling)
Layer 1 scaling is a process of modification on the underlying protocol to enhance its capacity and make the transaction speeds faster. To improve Layer 1 solutions, the blockchain architecture itself must be changed through changing the consensus mechanism and the data storage.
- Blockchain Sharding – Sharding technology in Blockchain involves dividing the network into smaller parts called shards, which are able to manage the blockchain more easily. The total transactions are distributed between a set of shards, each of which applies a portion of that to overall total and operate in parallel, in order to achieve higher total throughput of the network overall. The sharding which is being implemented as a key part of the Ethereum 2.0 upgrade is meant to improve scalability.
- Traditional blockchains that employ Proof of Work (PoW) are as secure as they are slow and resource intensive. The only way to increase the speed with which transactions are processed on the blockchain is to switch to an alternative consensus mechanism such as Proof of Stake (PoS) or Delegated Proof of Stake (DPoS).
- Increasing Block Size – Reducing the number of transactions per block increased the network’s transaction throughput. Larger blocks however, need more storage and more computational power and that could reduce decentralization.
- High Throughput Blockchain can be developed specifically for high throughput increasing transaction capacity and speeding up the network. For that, we can use Solana’s particular Proof of History (PoH) consensus mechanism to support high speed transactions.
Layer 2 Scaling (Off-Chain Scaling)
Layer 2 scaling solutions are built on top of main blockchain network that help congest the network and leady faster transactions by offboarding transactions off the chain. With layer 2 solutions, the blockchain is able to process more transactions without overwhelming the main network, which is called layer 1.
- State Channel In Blockchain – State channels are when two or more parties run multiple transactions without having to depend on Blockchain. The blockchain stores only the initial and final states, reducing the on chain transactions by the order of magnitude and improving the transaction speed. State channels at work are the Bitcoin Lightning Network and Ethereum’s Raiden Network.
- Rollups in Blockchain: Rollups are the bundling of many transactions out of chain which are then posted on main chain by a single transaction. It reduces congestion and maximizes the transaction throughput.
- Rollups, optimistic – Believe that in the majority of cases, a transaction is valid and loses if a disputed transaction is challenged.
- Zero-knowledge Rollups – Transaction verifications are performed using zero knowledge proofs allowing the validation of transactions quickly, without seeing what they are, improving security and scalability.
- Independent blockchains – Blockchains function apart from the main chain for transactions. Fast and more scalable processing, without compromising the security of the main chain can be done with side chains. One such well known side chain is Polygon that boosts Ethereum’s scalability.
- Plasma Chains – Plasma is root framework that implements chains which process transactions independently and submitted to the main chain its final state only. It reduces the loading on the main chain, however, only increases the security.
Blockchain Gas Fees Optimization
Major blockchain scalability problems are the high transaction costs. Methods of optimization of the blockchain gas fees are aimed at minimizing the computational and storage costs associated with the processing transactions. Improving contract efficiency of smart contracts, better selection of consensus algorithms, and utilizing layer 2 scaling solutions can be some reforms.
Hybrid Scaling (Combining Layer 1 and Layer 2)
The best blockchain scalability solutions are an integration of Layer 1 and Layer 2 solutions. For instance, combining sharding (Layer 1) with rollups (Layer 2) allows Ethereum 2.0 to have high throughput and low transaction costs. Typically, scalability and efficiency of a high performance blockchain architecture is improved at the protocol and network layers.
Cross-Chain Interoperability
Interoperability amongst the different blockchains can moderate the traffic on each network, enhancing the overall capacity of the transactions. Various blockchains can communicate and transfer data to each other through platforms such as Polkadot or Cosmos, thereby increasing overall scalability and network efficiency.
Challenges in Scaling Public Blockchains
As public blockchains are open and decentralized, they have special scaling challenge issues. Public blockchains are different from private blockchains in that they have to strike a balance between scalability, security and decentralization, whereas it is easier to optimize the transaction throughput in private blockchain because only the particular group has access. To resolve these problems, solutions like sharding, rollups, and refined consensus mechanism are employed in order to make the network accurate.
Role of Blockchain Development Companies
If a company wants to implement blockchain solutions for scalable use, they must take help from blockchain development company or blockchain app development company. Given that application setup and overall stream processing logic are handled by bolt and using bolt’s comprehensive configuration, experienced developers are able to design and implement customized scaling solutions for the particular requirements of the project. A solution is supposed to be secure, efficient, and capable of handling high volumes of transaction. To do so, hiring skilled blockchain developers is essential.
Blockchain App Development Cost and Hiring Strategy
As essentially everyone knows by now, that the cost of blockchain app development depends on factors such as complexity of the solution, underlying technology stack, and scalability demands. If you are a business to develop blockchain deployed at scale, you have to hire blockchain developers or developers with experience in various layers of the ladder and their solutions. However, as far as many companies are concerned, the initial development costs are less than the long term benefits of increased scalability and improved performance.
Case Studies and Real-World Examples
Public and private networks are battling with a common problem: the challenge of blockchain scalability. But a number of more real world implementations have been able to overcome issues of scalability with innovative solutions. Several of the following case studies identify how major blockchain platforms have adopted many blockchain scalability solutions in order to address the issues with blockchain scalability, and how blockchain transaction speed and throughput may be improved within blockchain.
Ethereum 2.0 – Sharding and Proof of Stake
It blocks high gas fees and suffers from scalability problems associated with the Proof of Work (PoW) consensus mechanism; while the Proof of Work consensus mechanism was well established within this space, it did not address Ethereum’s scalability challenges, leaving room for improvement.
Challenges:
- Low transaction speed (approximately 30 TPS)
- High gas fees during periods of blockchain network congestion
- Poor scalability for decentralized applications (dApps)
Solutions Implemented:
- To achieve better energy efficiency and faster transaction speed, PoS is enabled.
- Sharding is the process of implementation in blockchain for parallel processing of transactions across multiple shards.
- Rollups adoption in blockchain (Optimistic and ZK-Rollups) as the means to bundle multiple off chain transactions and post it as a single transaction on chain.
- Blockchain gas fees optimization through more efficient transaction processing.
Outcome:
- Increased transaction throughput and lower gas fees.
- It enhances the capacity to take care of huge scale dApps.
- Enhanced user experience with faster and cheaper transactions.
Bitcoin Lightning Network – State Channels and Off-Chain Scaling
Bitcoin’s PoW based consensus method has led to low transaction speeds and high fees which are not desirable for the largest blockchain adopted till now.
Challenges:
- Slow transaction processing (7 TPS)
- High fees during network congestion
- Lack of scalability for microtransactions
Solutions Implemented:
- The deployment of the Lightning Network, a state channel in the blockchain to facilitate off-chain transactions between partied.
- Since only the initial and the final transaction states will be recorded on chain, we reduce the congestion.
- Faster processing and lower costs through off-chain settlement.
Outcome:
- Near-instant transaction finality.
- Reduction in the fees and the time of processing.
- Widespread adoption for micropayments and small-value transactions.
Polygon – Layer 2 Blockchain Solutions
The goal of Polygon — so to speak — was to tackle the scalability issues in Ethereum and create a Layer 2 blockchain solution closely integrated with Ethereum.
Challenges:
- At high gas fees and slow transaction processing on Ethereum.
- Increased demand for dApps, DeFi platforms, and NFT marketplaces.
Solutions Implemented:
- Polygon uses both Optimistic and ZK-Rollups to rollups in blockchain.
- Independent chains that connect with Ethereum and handle transactions faster and at lower costs – sidechains.
- Optimization of blockchain gas fees by off chain processing.
Outcome:
- Through put for transactions reached greater than 65,000 TPS.
- Substantial reduction in gas fees.
- High adoption in the DeFi and NFT sectors due to fast and low-cost transactions.
Solana – High Throughput Blockchain with Proof of History
The excellence of Solana lies not only in its platform, but also in the fact that it was built from scratch to achieve top throughput and low latency, making it one of the fastest blockchains in the world.
Challenges:
- The need for a high speed blockchain for application or trading with financial applications.
- Ethereum and Bitcoin were very slow for high frequency trading.
Solutions Implemented:
- Proof of History (PoH) – An innovative consensus mechanism for cutting down the time required to process transactions via the incorporation of the timestamps.
- High parallel processing capability for increased transaction speed.
- Low fees and high throughput along with built-in scalability.
Outcome:
- Over 65,000 TPS achieved.
- Low fees and near-instant transaction finality.
- Strong adoption in DeFi, NFTs, and payment systems.
Avalanche – Subnets and Parallel Processing
Avalanche introduced a unique consensus mechanism and subnet architecture to solve scalability and performance issues.
Challenges:
- Need for a highly scalable blockchain for enterprise and financial applications.
- Existing consensus mechanisms were too slow for large-scale adoption.
Solutions Implemented:
- Subnets – Independent blockchains (subnets) that process transactions in parallel.
- Avalanche consensus – High-speed consensus with low latency and fast finality.
- On-chain vs off-chain scaling – Flexible architecture for both types of scaling.
Outcome:
- Over 4,500 TPS with low fees and fast processing times.
- Increased enterprise adoption and use in financial applications.
- Enhanced user experience with fast and secure transactions.
Polkadot – Parachains and Cross-Chain Interoperability
Polkadot was designed to enable interoperability between blockchains while maintaining scalability and security.
Challenges:
- Lack of communication between independent blockchains.
- Limited scalability of single-chain architectures.
Solutions Implemented:
- Parachains – Independent blockchains connected to the Polkadot network.
- Cross-chain communication using Polkadot’s relay chain.
- Parallel transaction processing to increase throughput.
Outcome:
- Increased network scalability and interoperability.
- Enhanced support for multi-chain dApps and financial platforms.
- Secure and fast transaction processing.
Binance Smart Chain – Dual Chain Architecture
Binance Smart Chain (BSC) was developed to provide a scalable platform for DeFi and smart contracts while maintaining compatibility with Ethereum.
Challenges:
- High gas fees and slow processing on Ethereum.
- Increased demand for low-cost DeFi transactions.
Solutions Implemented:
- Dual Chain – Binance Chain for fast trading and BSC for smart contracts.
- Proof of Staked Authority (PoSA) – Combines PoS with authority-based consensus for faster processing.
- Low-cost transaction processing.
Outcome:
- High throughput and low fees.
- Increased adoption in DeFi and NFT markets.
- Compatibility with Ethereum-based dApps.
Cosmos – Hub and Spoke Model for Interoperability
Cosmos introduced the Inter-Blockchain Communication (IBC) protocol to enable interoperability between independent blockchains.
Challenges:
- Lack of interoperability between blockchains.
- High transaction costs and slow processing.
Solutions Implemented:
- Hub and Spoke Model – Cosmos Hub connects different blockchains (spokes).
- IBC protocol allows secure cross-chain communication.
- Improved transaction speed and reduced congestion.
Outcome:
- Enhanced cross-chain communication and scalability.
- Increased support for DeFi and dApps.
- Reduced transaction costs and improved processing times.
Role of Blockchain Development Companies
The success of these scalable blockchain solutions demonstrates the importance of working with a professional blockchain development company. Businesses looking to implement scalable blockchain solutions should partner with a blockchain app development company that understands both Layer 1 vs Layer 2 scaling strategies.
By working with experienced teams, businesses can:
- Optimize transaction processing and reduce fees.
- Develop scalable and secure dApps.
- Achieve faster time-to-market for blockchain projects.
Conclusion
Blockchain scalability is essential for mass adoption and efficiency within the network. To overcome the limitations of transaction throughput, costs, and processing time, platforms can adopt newer solutions such as sharding, state channels, rollups and improved consensus mechanisms. It is necessary to have effective strategies to support such large scale decentralized applications as well as for enhancing user experience. An experienced blockchain development company allows businesses to add blockchain scalability solutions with ease and collaborate to implement the right one for their business needs.
FAQs
1. Why is blockchain scalability important and what is it?
This is known as blockchain scalability; it is the feature of a blockchain network to process an increased transaction volume without making any performance compromise. High scalability guarantees fast transaction processing, lower fees and a smooth user’s experience and is a must prior to mass adoption.
2. What are the main scalability problems in blockchain?
While all of the above seem to address scalability issues, key scalability challenges include high gas fees, network congestion and slow processing times. Furthermore, public blockchains in particular have problems in scaling with respect to decentralization and security while maintaining performance.
3. What are the differences between Layer 1 and Layer 2 scaling solutions?
Layer 1 solutions are changes to the base blockchain (e.g. sharding, consensus work) while Layer 2 solutions lie on top of the blockchain (e.g. state channels, rollups). Layer 2 provides scalability without changing the base network.
4. And what is the best blockchain scalability solution in 2018?
More importantly, by offering sharding, rollups, some of the most important teams in the industry actively developing Defis, state channels, proof of stake consensus, they lead the way of what is considered to be a good defi structure. These methods have been proved to be effective in improving scalability on platforms such as Ethereum 2.0, Solana, and Polygon.
5. What are the keyways to increase blockchain scalability in business projects?
By partnering with the right blockchain app development company, businesses will be able to scale up their operations by utilizing the Layer 1 or Layer 2 solutions. You need to hire experience blockchain developers to make the integration transparent of specific scalability strategies for optimal performance.
