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Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.
Today, we’ll talk about the three big problems every blockchain tries to solve at the same time. This is also called the “Blockchain Trilemma”. Knowing about this concept is important, because it’ll help you evaluate a blockchain’s future potential.
The three problems in the Trilemma are security, scalability, and decentralization. Achieving all of them at the same time is the holy grail that no technology has fully achieved today. Let’s take a look at why that is.
Security is the first problem, and in this context it simply means making sure that nobody can fake transactions.
Scalability is a blockchain’s ability to cheaply process so many transactions at the same time that it could replace everything from credit cards to banking – and that’s a lot.
Decentralization is about making sure that no single actor has control over the entire system, so that it is not influenced by an individual or an organization alone.
The problem is that each of those creates a tradeoff. For example, security for Bitcoin is ensured through proof-of-work, a process that slows things down deliberately, making Bitcoin too slow for real world use.
Ethereum is fully decentralized and secure, but transactions are slow and cost hundreds of dollars.
The Binance Smart chain is fast and cheap, because the company behind it chooses the few actors who can validate, but that also violates the principles of decentralization.
So you see where this is going.
But what does that mean for you? Simply use the Blockchain Trilemma to evaluate any blockchain you are researching - that’ll be a very good way of checking if something has future potential.
And next time, we’ll talk about popular blockchains again, taking a deeper look at Cardano.
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