Select Page

What You Need to Know About Scaling Blockchains

Blockchains

One of the most exciting reasons to learn about web3 is that we get to watch technology develop in front of our eyes. Scalability is the make-or-break problem for web3, and the world’s top talent are working feverishly to solve it.

At a glance

  • Although it is the dominant blockchain, Ethereum supports 100-1000x less scale than it needs to. When the chain gets busy, using the chain gets slow and expensive, neither of which are acceptable for mass adoption.
  • Recently popular competitor blockchains claim to be more scalable, but they crash far from their claimed limit. We’ll be facing these issues for a while – they won’t be going away soon.
  • Scaling comes in three parts: making more chains, splitting up chains that do too much into more specialized chains, and connecting all of these pieces together.
  • It’ll take years of work. The brightest researchers and technical talent have flocked to web3 to solve these types of problems. That’s really exciting, and this process will be a privilege to follow.

We’re far from where we need to be

If you take away just one idea about web3’s readiness for the masses, it’s this: none of the blockchains can support global levels of adoption yet.

Where we are today: Blockchain scalability is often measured in how many transactions can be processed per second (transactions per second; TPS). Bitcoin clocks in at 7 TPS, Ethereum at ~35 and major Ethereum competitors like Avalanche and Solana are in the low-to-mid hundreds.

Where we need to be: For reference, Visa processes around 1,500 TPS on average. If we really want to see global-scale adoption with multiple billions of users, we’ll need orders of magnitude better ability to handle traffic loads.

The explosion of newcomers into web3 in 2021 showed us hints of what would happen if infrastructure fails to improve: hundreds of dollars in transaction fees (gas), slow transactions and network crashes.

Next to developing killer use cases for blockchain technology, scalability is the most important problem that will make or break the viability of web3.

Success will be hard to measure

Every team is promising a pathway towards scalability.

Solana’s fans commonly claim today’s TPS limit is 65,000, while Ethereum hopes for 100,000 as it makes its way through its scalability roadmap.

But why is Solana suffering from repeated crashes when TPS hasn’t come even close to those theoretical limit? It points to the faulty nature of TPS as a reliable metric and why live usage at-scale will be the only way to know which blockchains will keep up.

We could be facing 3-5 more years of unreliable or rocky user experiences as development teams build technical improvements.

A non-technical summary of scalability efforts

The three major themes in scalability are:

  1. Make more blockchains (horizontal)
  2. Make “layers” of blockchains that each do fewer steps (vertical)
  3. Connect as many different “blockchain sandwiches” as you can (interoperability)

More blockchains – specialization: Right now, we think of each blockchain as an ecosystem. Ethereum, Solana, Avalanche, etc. each host hundreds of applications across all use cases. What if we made each blockchain specialize in its applications? Maybe a chain only hosts DeFi applications. Maybe it only runs one application. Or maybe it’s only used by a certain group of users. Specialization would allow each chain to optimize its behavior and configuration to how it’s used.

More blockchains – sharding: Another version of horizontal scaling is to break up one blockchain into more consumable pieces, called sharding. Today’s chains are maintained by hefty computers that need to do a lot of heavy lifting. In the future, web3 needs to make it possible for devices as small as smartphones to participate.

Layers of blockchains: Imagine a blockchain as a manufacturing line that produced data. Today’s blockchains are like craftsmen in that they follow on a piece of data through the entire process, from the moment you press the “Deposit” button to the moment your deposit saved. There’s an immense amount of work going on that tries to separate out each step of the process into specialized blockchains. These chains then pass data to each other, like factory workers on an assembly line, until it gets saved.

New “layer 2″s where your usage is much faster and cheaper but where data is still stored on Ethereum include Optimism, Arbitrum and StarkNet.

Interoperability: All of the steps above are creating a bunch of new chains. Where we have one chain for Ethereum and one chain for Solana, we could see hundreds, even thousands of chains that compose the “Ethereum ecosystem” and another set of thousands that compose the “Solana ecosystem”. How do we maintain truth across all of those chains? For the most part, today’s chains have no idea what’s going on in other chains. All of these layers of chains need to be connected to ensure usability – it would be a colossal nightmare to have to jump from chain to chain.

We need research and technical talent to succeed

Ethereum’s scalability is actively evolving. The technology is literally being developed as we speak! For example, some leading-edge technologies have recently made their way onto live systems, which changed the roadmap significantly.

Major advances have shifted the roadmap in the last 1-2 years. Broader rollout could take 3-5 years – or more, or less. Everything changes every 6 months.

It’s clear that making faster progress requires the world’s best technical talent and a whole lot of research hours to get there. Every one of the strategies above still has outstanding issues that prevent it from full-scale adoption.

And that’s why I’m hopeful: web3 is a gathering of some of the most talented minds in the world. It’s a huge undertaking, but getting to watch it play out in realtime feels like a once-in-a-generation opportunity.

Read The Delegate

There's too much news in web3 and not enough insight. Every week, I give you the headlines you need to know and how to sound smart about them. It's all of web3 without the web3 madness.

The Delegate publishes Thursday mornings.