When the concept of blockchain was conceived, it was grounded in decentralization. A system that had open participation, distributed validation, and reduced reliance on central authorities. At that time, speed wasn’t a major concern.
However, the conversation is totally different today as these networks support lots of finance and entertainment apps. That growth comes with the pressure for faster confirmations and smoother experiences.
Unfortunately, scaling for speed tends to affect decentralization in blockchain, something that has made developers come up with more modern architectures for blockchain networks.
What blockchain decentralization and performance mean in practice
Decentralization is a concept that takes back control from central authorities like banks and institutions. It does this by allowing independent validators to verify transactions on a blockchain and take control over its future. This way, everything is distributed to ensure no individual or group has all the authority. This approach is responsible for the transparency and security for which blockchain technology is known.
Performance, on the other hand, is about how efficiently the network handles activity. It’s measured by transaction throughput, confirmation speed, and fee stability. It becomes significant when activity increases, as you still need the network fee to remain practical for things like crypto payments, decentralized finance, and gaming.
Both performance and decentralization are crucial for modern blockchain activities, but they don’t traditionally go hand in hand.
Why improving speed can threaten decentralization
To increase the speed of a blockchain, you need to make a few structural changes to how the blockchain operates. These changes raise the throughput and reduce confirmation times, but they also redefine the people who can take part in the network.
A common approach is to increase the block size or make block intervals shorter. Making the blocks larger allows the blockchain to process more transactions at once, while shorter intervals reduce the time a transaction needs to wait for confirmation.
But while they improve performance, the two also mean that the blockchain now has higher bandwidth, storage, and processing demands. This translates to validators needing much more powerful hardware, which, of course, means only fewer people (or groups) can participate.
How modern architectures are addressing the balance
Instead of forcing a single network to maximize both speed and decentralization, modern approaches are refining the architecture by taking a modular approach. This is being done in different ways.
Layered scaling
This approach separates execution from the final settlement. Transactions usually take place on a different network, known as a Layer 2 chain, which is anchored to a base layer for security.
In most cases, this base layer is Ethereum, as it was the first blockchain to make dApps and the general web3 possible. It has significantly high traffic, so processing transactions outside the chain is often necessary.
The Layer 2 blockchain then sends proofs or summaries to the base chain, which validates them before they are permanently recorded.
Sharding to distribute workload
Sharding is an approach that partitions a network into smaller pieces (shards) that can process transactions by themselves. This means that the blockchain doesn’t handle transactions as one unit. Since each shard can process, simultaneous processing is made possible, and this significantly increases the amount of data that can be processed within a given timeframe (throughput). It’s a big and beneficial change from every validator handling every transaction. Validation doesn’t need advanced infrastructure, but throughput increases.
Parallel execution models
Parallel execution changes the traditional model where transactions are processed sequentially to a simultaneous approach. It does this by identifying transactions that don’t depend on each other, allowing the network to validate them at the same time.
This is the approach used by blockchains known for speed, like Solana.
Designing blockchains for both speed and distributed trust
Layered scaling, sharding, and parallel execution all help ensure that increasing performance doesn’t have significant negative effects on decentralization by raising barriers to participation. Together, they signify a shift in blockchain design towards modularity, as it prevents seeing and treating performance and decentralization as opposing forces.
