The Blockchain Trilemma

Richard Gottleber

Dec 8, 2023 — 2 min read

Thanks DALL-E

The Blockchain Trilemma

The term blockchain trilemma was coined by Vitalik. It refers to the idea that blockchains suffer from three competing factors, decentralization, security, and scalability. I like to think of it like a stat sheet from DnD.

Like DnD, a blockchain has a set number of points they can allocate to each stat. You could, for example, make a super secure blockchain at the cost of its scalability or decentralization. The goal of any blockchain is to decide about its use-case and min-max their stats. Min-max addresses how to best assign ability points, equipment, and skills to get the most power effectiveness within a game system. Players accept penalties in areas that hamper their character’s effectiveness least in the game. Think of it like making a strong but unintelligent barbarian warrior. The needs of each blockchain would determine how to best solve this issue. You do need to remember though that you can’t max out every stat. What do the stats mean, though?

Decentralization

Decentralization is one of the core components of blockchains. In a traditional system, control of data and assets is held by a central entity. Decentralization changes this, it empowers the users by allowing anyone to help build and maintain the system. It does this in a permission-less fashion. Anyone can take part, and the system belongs to those participants, not a centralized entity. Data is shared with everyone participating in the blockchain, and they can all verify and insure its integrity.

Security

Blockchains need to be able to protect themselves from bad actors. A key difference from centralized systems is that blockchains are transparent, intentional. Many centralized systems rely on their closed design to provide security. Whoever is in control can provide assurances that data is free from any issues. In a decentralized system, there needs to be mechanisms in place to provide these assurances. This is achieved through a combination of a consensus mechanism, like Proof of Work or Proof of Stake, and cryptography. The consensus mechanism helps secure the blockchain by ensuring nodes within the blockchain have a cost associated with taking bad actions. Cryptography is used to hash the data in a way that ensures once the data is recorded, it’s connected to previous data to prevent tampering.

Scalability

Decentralization and security come at the cost of transaction speed. That’s what scalability refers to, the ability of a blockchain to handle more and more transactions per second. From the end user perspective, this might be the most important stat when it comes to adoption. People have come to expect computers to be fast. It doesn’t mean you can build without the other two components. They become essential after adoption, as I see it.