Blockchain Architectural Tradeoffs: How to design it?

Introduction

In the ever-evolving landscape of blockchain technology, understanding the architectural tradeoffs of modern blockchains is crucial for navigating the complexities of this innovative space. The recent report by THEBLOCK.CO delves deep into the key elements that shape the design choices of protocols like Ethereum, Cosmos, and Solana.

This blog post aims to provide a comprehensive summary of the report, highlighting the main points discussed in each chapter to shed light on the intricate world of blockchain architecture.

Classifying Modern Blockchains

Modern blockchains have undergone a significant transformation from simple peer-to-peer networks to sophisticated systems enabling a wide range of financial activities.

The report categorizes blockchains into four main types: monolithic blockchains, monolithic blockchains with parallel processing, multichain protocols, and modular architectures. Each type presents unique tradeoffs in terms of scalability, decentralization, and security.

This framework, often referred to as a “modular” framework, was popularized by the Celestia team, emphasizing the importance of including the data availability layer. However, it is essential to acknowledge potential bias in these terms, as Celestia aims to lead in data availability for blockchains with a rollup-centric approach.

The terms “monolithic” and “modular” can be misleading when describing blockchains. While monolithic chains traditionally perform all blockchain functions within a single architecture, modular chains are perceived as flexible and multi-functional. In reality, the distinction is more nuanced. Some argue that the definition of a monolithic chain, encompassing all functions, may align better with modular layers like Celestia’s data availability network, which solely publishes transactions without executing them.

Despite these complexities, grouping and classifying blockchains based on their performance of key functions remains valuable. The report maintains the data availability layer in its framework, recognizing the increasing importance of data availability for scaling rollups. Rather than labeling it as a modular framework, the report prefers to describe it as a blockchain function framework. This approach focuses on defining blockchains by their responsibilities and functions, rather than implying that these responsibilities must be optimized individually.

Scalability Tradeoffs Across Blockchain Functions

The increasing computational demands of the digital economy have led blockchain development efforts towards a common goal: scaling. This focus on scalability has influenced a framework that categorizes blockchains based on key functions such as execution, settlement, consensus, and data availability.

In recent years, there has been a trend towards optimizing individual functions of blockchains, particularly within the Ethereum community, to enhance overall scalability. This approach, known as a modular approach, involves breaking down the main network components underlying these functions and analyzing the tradeoffs made to improve specific functionalities. The scalability trilemma is a popular mental model used to understand the interdependent relationship between scalability, decentralization, and security in blockchain architecture.

The scalability trilemma posits that maximizing two out of the three factors (scalability, decentralization, security) inevitably leads to a decrease in the third factor. Scalability refers to a network’s ability to process a high volume of transactions, decentralization ensures censorship resistance by distributing trust, and security guards against economic attacks on the network.

Efforts to scale blockchains have highlighted the challenges of increasing throughput without compromising decentralization or security. For example, while increasing block size can temporarily boost throughput, it can raise transaction costs and limit node participation, impacting decentralization. Balancing these factors is crucial, as highly scalable and decentralized blockchains may face heightened security risks, and highly secure networks can be challenging to scale due to latency issues.

The scalability trilemma serves as a guiding framework for understanding the tradeoffs involved in enhancing specific blockchain functions. While it is not a strict limitation on blockchain development, it provides insights into the complexities of achieving scalability, decentralization, and security in blockchain design. Teams continue to innovate and address these challenges, pushing the boundaries of current scaling limits and finding ways to maintain a balance between these critical factors.

Scaling solution approaches

Current approaches to addressing scalability in blockchains can be categorized into two main strategies: horizontal scaling and vertical scaling.

1. Horizontal Scaling:

• Horizontal scaling involves distributing key blockchain functions across multiple systems to alleviate bottlenecks in transaction throughput.
• Multichain protocols like Cosmos exemplify an extreme form of horizontal scaling by utilizing multiple app-specific blockchains to independently handle all essential blockchain functions, effectively distributing network activity.
• A more nuanced approach to horizontal scaling is through modular architecture, where key blockchain functions are divided into separate layers, often represented by individual blockchains. This allows for individual optimization of these layers to enhance overall throughput.
• The modern rollup landscape is an example of modular architecture, with various execution layers settling transactions on Ethereum and specialized data availability layers like Celestia. Ethereum’s development has shifted towards a rollup-centric roadmap, transitioning from PoW to a new PoS consensus layer during The Merge.

1. Vertical Scaling:

• Vertical scaling takes a different approach by focusing on maximizing blockchain performance within a monolithic architecture.
• This strategy involves increasing hardware requirements for validators to enhance computational capacity and transaction throughput, albeit at the expense of decentralization to some extent.
• While vertical scaling emphasizes performance within a single architecture, it is essential to consider that each blockchain function comprises multiple underlying components that can impact scalability, decentralization, and security during the optimization process.
• Solana is highlighted as an example of vertical scaling with its unique execution-focused architecture, which has evolved progressively to address scaling challenges. A comparison of Solana’s scaling approach with other major smart contract platforms showcases its distinct strategy in optimizing performance.

By understanding the distinctions between horizontal and vertical scaling approaches, blockchain developers can tailor their strategies to enhance scalability while considering the tradeoffs in decentralization and security.

Solana: The Case for Monolithic Execution

Solana, a monolithic blockchain launched in 2020, is designed with a primary focus on achieving high scalability, fast transaction finality, and low transaction fees. The core design philosophy of Solana revolves around optimizing blockchain execution by leveraging cutting-edge hardware technology continuously. Central to Solana’s approach is the utilization of a custom execution environment called the Solana Virtual Machine (SVM).

The Solana Virtual Machine (SVM) is a key component that enables the parallelization of transaction processing within the Solana network. This parallel processing capability allows Solana to significantly enhance its throughput compared to traditional single-threaded runtimes like the Ethereum Virtual Machine (EVM). By leveraging the SVM’s Sealevel runtime, Solana can process transactions in parallel, leading to a substantial improvement in overall network performance.

In addition to the SVM, Solana incorporates several other innovative elements within its custom blockchain stack to support its parallel processing capabilities. One crucial component is the Solana transaction processing unit (TPU), which plays a vital role in transaction processing within the network. The TPU utilizes the kernel space, CPU, and GPU of each validator at different stages of transaction processing, depending on whether the validator is operating in “leader mode” or “validator mode.”

Within the Solana network, there is always one validator designated as the leader at any given time. The leader validator is responsible for producing blocks, organizing transactions within the block, and disseminating this information to all other validators in the network. This coordinated approach ensures that transaction processing is efficiently managed and propagated across the network, contributing to Solana’s high scalability and fast transaction finality.

Overall, Solana’s design principles, including its focus on optimizing blockchain execution, leveraging advanced hardware technology, and implementing parallel processing capabilities through the SVM and TPU, have been instrumental in establishing Solana as a high-performance blockchain platform with a strong emphasis on scalability and transaction efficiency.

Modular and Multichain vs. Monolithic Scaling

The chapter compares the approaches of modular and multichain blockchains with monolithic blockchains in terms of throughput, hardware requirements, and decentralization. It highlights the ongoing evolution of blockchain scaling strategies and the importance of balancing scalability, security, and decentralization to ensure long-term sustainability.

Conclusion

In conclusion, the report provides valuable insights into the architectural tradeoffs of modern blockchains, emphasizing the importance of considering scalability, decentralization, security, and usability in blockchain design.

The key takeaway is that a balanced approach that addresses all these properties is essential for the long-term success of blockchain networks. By understanding the nuances of different blockchain architectures and scaling strategies, stakeholders can make informed decisions to drive innovation and growth in the blockchain ecosystem.

Key Questions Answered:

1. What are the main functions that blockchains perform, and how are they categorized in this report?
2. How do Ethereum, Cosmos, and Solana differ in their design approaches, and what are the strengths and weaknesses of each?
3. How do horizontal and vertical scaling impact the performance and security of blockchains, and what are the trade-offs between them?