Cryptocurrencies are continuing to become more mainstream. With each passing day, the number of daily Bitcoin transactions inches upward. The problem is, we still haven’t found a way to solve the scalability problem.
Why is Blockchain Scalability Such an Issue?
Cryptocurrencies were not initially designed with the idea of widespread use and adaptation in mind. As the number of daily transactions continues to rise, an increasing number of issues are popping up.
Many crypto enthusiasts are holding onto the hope that cryptocurrencies will eventually be able to compete with the likes of PayPal and Visa. However, as it stands, we are far from it.
Visa is currently the fastest measured payment network. It is capable of processing approximately 24,000 payments per second. In comparison, PayPal can process approximately 193 transactions per second.
Most cryptocurrencies are still lagging far behind. Ripple is the outlier and can process up to 1,500 transactions per second, suggesting that it is likely to have the potential to become a viable payment method in the future.
Meanwhile, Bitcoin and Ethereum are even further behind with transaction speeds of seven and 20 transactions per second, respectively. This issue severely inhibits the likelihood of either becoming mainstream payment solutions in the future.
The transaction speed for cryptocurrencies is determined by the time taken to add a transaction to the block plus the time taken to reach consensus.
Proof-of-Work (PoW) Vs. Proof-of-Stake (PoS)?
As it stands, the two most popular mining protocols are Proof-of-Work (PoW) and Proof-of-Stake (PoS).
However, there are significant issues with both of these protocols. For starters, the Bitcoin PoW protocol has incentivized a significant number of individuals and organizations to buy more hardware and build huge mining farms, despite the fact that Bitcoin is supposed to be the most decentralized blockchain. As a result, most of the hashpower is now controlled by a very small number of organizations.
The PoS protocol is touted to have a small number of benefits over PoW–for instance, slightly lower computational power requirements, slightly lower power consumption and slightly faster transaction speeds–which explains why Ethereum decided to implement it as part of its Casper update. However, this protocol comes with its own issues.
With the PoS protocol, the more the user stakes, the higher chance they have of being the one to claim the block reward. This means that, once again, this system mainly benefits large organizations with large sums of money to stake.
IOTW’s Proof-of-Assignment (PoA) Protocol
In an attempt to solve these issues, IOTW has recently invented a new way of mining, known as Proof-of-Assignment (PoA). This method will require significantly less computational power than both PoW and PoS–so much so that even normal electrical appliances will have the ability to mine IOTW coins without significantly increasing their electricity usage.
Potentially the most notable of all is the fact that the PoA protocol is significantly faster than both PoW and PoS, making it a potential solution for the current scalability problems facing the blockchain. PoA can already process thousands of transactions per second, putting it way ahead of Bitcoin, Ethereum and most other major cryptocurrencies.
Their target is to reach 1M/tps, which would enable them to process even more transactions than Visa.
Yet another benefit of the PoA protocol is that it is fully compatible with IoT devices, and there is no risk of power or memory loss. This will be vital in the coming years, considering the IoT industry is expected to grow significantly.
Finally, for blockchain to become widely adopted, it is vital that it’s easy and convenient to use. For users to be able to mine IOTW coins, there is no added software that they need to buy. They can simply just download the firmware and begin mining instantly.
In time, companies will even include the IOTW pre-installed in devices to make the process even easier.
The Delegated Proof-of-Stake (DPoS) Protocol
Despite its name sounding very similar to Proof-of-Stake (PoS), DPoS is actually very different. In this mechanism, token holders don’t actually vote on the validity of blocks by themselves. Instead, they elect delegates to do it.
While PoW and PoS require miners to compete for blows, DPoS allows miners to collaborate to make blocks. As a result, DPoS can run significantly faster than other consensus mechanisms.
It currently takes approximately 10 minutes for a Bitcoin block to be mined. EOS, on the other hand–one of the first cryptocurrencies to implement the DPoS protocol, along with Steemit and Bitshares–has an average block time of under one second.
This allows cheap transactions, enhances scalability and makes the process energy efficient. The main downside of this protocol is that it is partially centralized.
The Future of Blockchain Scalability
There have been many different proposed blockchain scaling solutions over the years–from the likes of Segwit and block size increase to Sharding and Plasma. Each solution has its pros and cons and there has been significant debate over which is the most suitable.
However, one thing is for certain: to support the increased usage of cryptocurrencies, we need to step up our efforts to find a suitable scaling solution.
Whether the issue can be completely solved is yet to be seen but so far, the results are looking promising.
Cover Photo by Aaron Sebastian on Unsplash