Sidechains, beacon chains and why we shouldn’t give up on Blockchain performance quite yet

By Kurt Seifried, Chief Blockchain Officer, CSA

If you’ve been in IT you’ve probably learned one of the simple lessons:

Scaling out is hard and can be expensive, but scaling up is easy and even more expensive. In simple terms if you can scale out you can keep costs down, ideally at a linear growth rate (e.g. handling twice as much web traffic by simply buying a second server). Scaling up is often easier, you want code to run twice as fast, simply get a computer that has a much faster CPU (both capability and clock rate wise), but scaling up quickly hits boundaries (like what’s the fastest single system you can buy). What usually ends up happening is you try to identify as many spots as possible where you can turn serial operations into parallel operations, and do them not only on multiple systems, but at the same time.

Scaling for Blockchain

Blockchains are no different. The majority of current Blockchain technologies are sold as decentralized and massively parallel, and they are. But while most current Blockchain technologies create multiple blocks at the same time, only one block is picked or “wins consensus” at which point all the other work is thrown out, and a new block is started on (so not very efficient). Bitcoin is an extreme example with each block taking about 10 minutes to create. So despite having millions of systems mining for a valid Bitcoin it can only do a total of 1 block every 10 minutes (worse, this is a chosen value for a variety of economic reasons, in other words an arbitrary limitation that probably won’t change much in the future). Even if you are mining large blocks to improve throughput this 10 minute creation time introduces a major amount of latency; payments that are processed on the main Bitcoin Blockchain take at least 10 minutes to clear and sometimes longer. Imagine trying to use a Bitcoin payment system at the supermarket and having to wait 10 or more minutes for the payment system to tell you if the payment went through or not before you can leave with your groceries. The technology and choices used by the Ethereum Blockchain are better, with blocks taking 10 to 19 seconds to create, but this is still a lot longer than most electronic payment systems take to process and approve a payment.

Using Side Chains (or shared chains)

The obvious solution is to not only allow for more parallel block creation but to pick more than one winner. There are a number of names for the various strategies here but they are often referred to as side chains or shard chains, or more technology specific names like Ethereum's “beacon chain” proposal. As you can see from the diagram below the beacon chain is a non trivial matter, if you want to understand it there are a number of good write ups on it.

Ethereum 2.0 overall architecture. Original diagram by Hsiao-Wei Wang.

So yet again we have a classic bad news/good news situation. The bad news is that the current Blockchain technology doesn’t scale very well, typically has high latencies, and low throughput. The good news is that the fundamental concept of Blockchain (an immutable distributed ledger technology with distributed consensus mechanisms) is good, and people are working on the scaling, latency and throughput, and more.

Interested in reading more about Blockchain from the Seifried Files? Continue reading the blog posts in this series here.