Ethereum, a distributed public blockchain network, is increasingly being used to enable enterprise transactions that require automatic, rule-based transfer of valuable assets. Ethereum realizes its acceptability for enterprise applications because of ‘Smart Contract,’ a feature that encapsulates the business rules governing any asset transfer. This has brought immense flexibility for its wider enterprise application and has resulted in many interesting and useful applications.
The popularity of the network has resulted in large number of transactions being executed on Ethereum public blockchain network and these transactions have started testing scalability limits of the network.
The Scalability Challenge
There is a scalability challenge due to inherent properties of Ethereum mining that restricts block generation to between 7-15 transactions per second. As a comparison, Visa network processes around 45,000 transactions per second. A key contributing factor for this restriction is the need for every node to process each and every transaction that happens on the network. Unless this challenge is resolved, the transaction congestion can lead to long wait times for Ethereum users. In order to be ready for enterprise-class applications, the Ethereum network needs to improve its transaction processing speed on a mega scale.
Potential Solutions
There are three potential solutions to resolve the scalability issue. However, each solution comes with its own pros and cons, which need to be taken into consideration before addressing the scalability challenge.
Sharding: Sharding involves dividing a chain state into smaller partitions called shards. Nodes within a shard must process all transactions that originate in that shard. Thus, by reducing the number of nodes that must process each transaction, overall network throughput can be improved.
State Channel: This solution prioritizes the operations it works on while the remaining operations are shifted off the chain (off-chain). Only a proof is submitted to the main chain after the transactions are processed as off-chain.
Plasma: Plasma is another off-chain scaling technique that relies on off-chain transactions (in the child chains) with minimal interactions with the main chain.
Critical Comparison of Solutions
While the methodology and technique of creating a sharding-based solution are available, there can be some challenges in potential takeover of a single shard by the miners and difficulties of facilitating cross-shard communication. However, there are documented protocols to avert these issues whenever sharding is implemented.
Since ‘state channel’ relies on conducting most operations off the main chain, state updates assume critical importance. The attribute of ‘challenge period’ can be configured in such a way that parties have reasonable time to confirm the final state.
Plasma-based solutions depend on creating child Blockchains attached to the main Ethereum Blockchain so that interaction with the main chain can be minimized. It implements the checks and balances with a possibility for the parties to exit from the child chain if any entity ends up getting 100% control of it. There is one major challenge with Plasma in which all parties on the child chain try to leave at the same time. But, it can be addressed through configuring the appropriate challenge period.
A critical study of the three scalability solutions must be conducted for your specific situation before a solution or a combination of the solutions is implemented to resolve the scalability issue once and for all. But, its critical importance to the ultimate success of Ethereum in an organization cannot be overstated.
Realistic Ethereum Scalability Solutions Available
While there are well-documented solutions to resolve the scalability challenges of Ethereum Blockchain network through Sharding, State Channel and Plasma individually or in combination, there are certain advantages, efficiencies, and complexities in implementing each. A detailed evaluation of these three solution options by us indicates a high probability of success if the right combination of options is selected. It also makes a lot of sense to collaborate with a partner with the right expertise to convert all efforts to business value quickly.
