Every day, the number of people dipping their feet into the world of crypto is increasing tremendously. The graph is no longer a simple straight line!

To put this into perspective, the market cap of cryptocurrencies multiplied by over 1,700 times in just about 8 years (from 2013 to 2021)!

Interestingly, the adoption of cryptocurrency started soaring more than ever since the beginning of the COVID-19 pandemic, i.e., the end of 2019.

Adversity breeds innovation.

While such growth is something to be happy about, there’s also a new set of challenges that surface.

The Trilemma

The Blockchain Trilemma is a concept proposed by Vitalik Buterin, the creator of Ethereum.

According to Vitalik, a blockchain should ideally be;

• Scalable
• Secure
• Decentralized

Unfortunately, traditional blockchains can only choose two of the three traits at the expense of the third.

1. Scalability

Scalability essentially refers to how fast transactions can be executed on the blockchain.

Blockchain, at its core, is just a network that transmits information from one point to another. These points are called ‘nodes’.

For a network to be very very fast, it needs to make decisions faster, i.e., validate transactions faster.

That means, the decision-making process should be faster, which is not possible when there are many nodes.

2. Security

Blockchains employ hashing algorithms like SHA-256 in an effort to maximize security.

For a blockchain to be very secure, every node in the chain should be able to compute complex mathematical equations. This requires a lot of processing power.

3. Decentralization

Most importantly, blockchains ought to be decentralized.

Hence, validation of transactions should ideally happen on a network as expansive as possible.

Meaning, we want nodes. A lot of them!

That way, the entire network cannot be compromised by a select few individuals.

Scalable + Secure = Poor Decentralization

If you want a blockchain to be highly scalable and secure then you would have to;

• decrease the number of nodes to increase speed
• concentrate validation to a fewer nodes with a lot of processing power

When this is done, the network becomes less and less decentralized.

This is how traditional financial institutions, like banks, function. All validation and communication happen on a single node, i.e., the institution.

Such an infrastructure increases the chances of corruption, manipulation, and 51% attacks.

Scalable + Decentralized = Poor Security

If you want a blockchain to be highly scalable and decentralized then you would have to;

• increase the number of nodes to facilitate decentralization
• lower security so that computation can happen faster for transactions to be validated

As a result, security is compromised and the chain, due to its transparent nature, can be exploited by malicious hackers much more easily.

Secure + Decentralized = Poor Scalability

If you want a blockchain to be highly secure and decentralized then you would have to;

• increase the number of nodes to facilitate decentralization
• increase the complexity of the mathematical equations that the validators have to solve

This is the model of Bitcoin’s network — extremely secure and decentralized.

The downside to this is that transactions could day hours to go through and the gas fees could be exorbitantly high!

Conclusion

While the Blockchain Trilemma is an interesting concept, it is not a law.

There are ongoing efforts to achieve scalability, security, and decentralization. Layer-2 blockchains, like Polygon, and Layer-1 blockchains, like Solana, are examples of this.

Ethereum is also transitioning to a Proof of Stake consensus in the hopes to solve the trilemma.

Nevertheless, the Blockchain Trilemma is a good concept that can be kept in mind and used as a lens to begin evaluating a new blockchain project.