The ‘Blockchain Trilemma’ That’s Holding Back Crypto

Most successful innovations take off in a similar way: You create something that people want and, when sales increase, economies of scale make it cheaper to produce, stoking more demand. For crypto, it’s not that simple. As the volume of activity involving tokens like Bitcoin and Ether grows, the slower and costlier it becomes to record and secure each transaction. There are various efforts to fix the problem, but all either make the system more vulnerable to bad actors or water down the decentralized model that’s key to crypto’s appeal. This “Blockchain Trilemma” is one of the thorniest challenges to mainstream adoption of crypto technology.

Public blockchains are crypto’s engine room. These digital ledgers record account balances, contract codes and other data using complex digital keys. The knowledge that those records are public, and cannot be deleted, altered or copied, engenders the trust that allows dispersed groups of collaborators to work or transact together on blockchains without the need for an intermediary. That trust is reinforced by duplicating and verifying the information across multiple computers in a network. For this reason, many original blockchains can’t process more transactions than a single computer in the network can handle. This can lead to blockchains being overwhelmed by the volume of work, causing delays and exorbitant costs for users, especially during bouts of intense crypto market activity. As of September, Bitcoin was unable to handle more than about seven transactions per second and Ethereum, the second-most popular crypto network, was limited to about 15 per second -- a lifetime compared to conventional electronic exchanges.