Scalability is the Answer to Successful Platformization
UDC Story — Insights from UDC 2018
On December 5, 2017, a notice was posted on the cryptocurrency exchange Bithumb. The notice stated that there were delays in Ethereum withdrawals. This was not due to an issue in the exchange itself, but an issue in the Ethereum network.
In cryptocurrency communities, investors were pointing the finger at Coinone, a different exchange. They complained that they requested Ethereum withdrawals, but the transactions weren’t going through. They were angry because they felt that the exchange didn’t care about their situation, using Ethereum’s network problem as an excuse. Three days later, Coinone also posted a notice on its bulletin board regarding withdrawal delays. They emphasized again that the delays were due to the Ethereum network and that the exchange was not responsible.
The transactions per second (TPS) for Bitcoin is 7, while Ethereum is 15 ~ 20. Although Ethereum’s transmission speed should be faster than Bitcoin, it was the opposite.
The reason for the transaction delay, explained in a roundabout way as a network problem, was because of a “kitten”. On November 28, 2017, a Vancouver-based startup called Axiom Zen launched the Ethereum-based game CryptoKitties. Similar to Pokémon GO, CryptoKitties uses a system where users collect various virtual cats and breed new ones by “mating” their cats with the cats of other users.
As it was a game based on the blockchain, the digital cats were completely unique and could not be duplicated, which was a major selling point to early adopters. According to TechCrunch, 15% of the Ethereum network transactions, as of December 3rd, were from CryptoKitties users, even though the game was out for less than a week. Other Ethereum network users, as well as those playing CryptoKitties, could not make transactions or breed their cats due to the Ethereum transaction delay.
The CryptoKitties team notified its users through Twitter on the 8th that “The fee for breeding is being raised from 0.001 ETH to 0.002 ETH due to network congestion. This will allow your CryptoKitties to be born on time.” The network overload was resolved only after the fee was increased.
◇ Limitations of CryptoKitties and the history of scalability problems
There was a time when computer specifications were categorized as 386, 486, etc. There was no real Internet — only a few online services. The first thing that comes to mind when I think of the 1997 movie Connection with Jeon Doyeon and Han Sukgyu is the mechanical sound you heard when you tried to connect to online service over using the phone line. In that slow-speed environment, currently popular games such as League of Legends or Battleground, would be unimaginable. The only available games at the time were programs that could be run with those computers, like Tetris or Galaga.
Starcraft, a game created by the US game company Blizzard, not only took the so-called Gen X users of 1998 by storm, but also brought forth a remarkable revolution in network speed. Internet cafes sprung up even in rural areas, and ADSL services became common in homes. It’s difficult to determine if games like Starcraft gained popularity because high-speed communication became possible or vice versa, but there is no doubt that this situation allowed Korea to emerge as an e-sports powerhouse.
CryptoKitties’s popularity owes much to the fact that it’s blockchain-based, but the game itself is much simpler and more rudimentary compared to even Tetris or Galaga. Still, the Ethereum network was unable to support its transactions. Despite the noble idea of decentralization, there is no reason to select the blockchain when considering speed and practicality. When using a service based on a successful platform, the actual platform itself, and its problems, shouldn’t be so noticeable.
Current platform speeds are insufficient to establish a DApp ecosystem based on the blockchain. At the minimum, it needs match the level of the Internet. And to fulfill this minimum prerequisite, scalability is required.
Scalability is the ability to absorb the changes that occur as time passes. Most of these changes lead to growth, so it can also be expressed as ‘expanding’ or ‘upgrading.’ Although there are a number of different meanings for scalability, the most basic definition is to increase the transaction processing speed so that more people can use it.
Scalability, or more specifically the methods required to resolve the transaction speed issue, are categorized into ‘on-chain solutions’ and ‘off-chain solutions’. On-chain solutions are, as the term implies, attempts to resolve the speed issues in a chain. To increase the number of transactions per second, the block size can be increased to store more transactions per block. This is the preferred method for the so-called Big Blockers. On August 1st, 2017, then-Bitmain CEO Jihan Wu and supporting mining groups hard-forked Bitcoin Cash from Bitcoin with the goal of increasing the block size.
However, they did not touch the block size for off-chain solutions, which includes methods such as ‘SegWit (Segregated Witness).’ Off-chain solution is a method that separates the digital signature that exists in the block, creating more room and allowing more transactions to be stored.
Let’s take the example of a popular restaurant looking to grow. The owner can select two options. One is to move and expand the restaurant, which would be like increasing the block size. This is the simplest method, but it requires a lot of money, and there is no guarantee that the business will continue to thrive. On the other hand, SegWit, one of the off-chain methods, does not change the restaurant itself. If rearranges the tables in a more efficient manner to increase the number of customers that can be accommodated. More customers can be served without increased cost or risk.
There is also the Lightning Network. The Lightning Network leaves the main chain alone and creates new payment channels. The only time a transaction is recorded to the main chain is when the chain is opened or closed. Regardless of how many transactions occur on the payment channel, recording on the main chain only occurs twice, removing the possibility of overloading the main chain. In addition, there is no need to wait until a new block is generated, allowing quicker approval. Fees are only paid when the channel is opened or closed, so there are no fees for the in-between transactions.
It was named the Lightning Network as to signify it fast transaction speed. This scalability solution is mainly applied to Bitcoin. A similar scalability solution for the Ethereum is called the Raiden Network. ‘Raiden’ comes from the Japanese term ‘Raijin.’ Raijin, which combines the Japanese word ‘rai,’ which means ‘lightning’, and the word ‘shin,’ which means ‘god’, appears in ancient Japanese mythology as the ‘god of thunder.’
Plasma goes one step further from the Raiden Network. Plasma also creates a payment channel outside of the blockchain, but it has the structure of a separate blockchain that exists within the Ethereum blockchain. This is a technology that minimizes writing to the blockchain using child-chains. Currently, DApps record all data on the Ethereum blockchain (main-chain). Not only does this create problems with speed, but it also causes block size issues and increased gas consumption per data volume. Plasma makes a separate chain and only syncs the minimum data necessary for verification with the main Ethereum blockchain.
Ethereum’s block size can be reduced, DApps can be run at high speeds, and Gas consumption can be minimized through this method. The validity of the Plasma child-chain can be verified through the Ethereum main blockchain. Currently, Omisego (OMG) and Cosmos are collaborating as commercialization partners.
◇ Sharding, the ‘Ultimate’ scalability solution
Sharding is the ‘ultimate’ solution for scalability issues. Unlike the Plasma or Raiden networks, it is an on-chain solution. Hard forks are required for on-chain solutions as they use a method to change the protocol of the main chain itself to increase the performance of the main chain. This is different from off-chain solutions as they don’t require a hard form by adding a system outside the main-chain.
The term ‘sharding’ will be familiar to people who have knowledge of how databases work. Due to its immense volume, the data on databases must be segmented to be used and managed effectively. The whole system status is divided into multiple sub-statuses called Shards, with transactions being processed in each of the relatively independent shards. The method uses parallel processing to secure scalability. The idea is that, if we have 100 transactions, those transactions can be divided into separate shards with ten transactions each, and all ten shards can run simultaneously.
Existing blockchain technology can’t process transactions separately. As it uses serial processing methods which gathers transactions together for processing, there is a limit to the scalability secured regardless of how many nodes are added or TPS increased. Sharding, with its parallel processing, allows for the processing of multiple transactions simultaneously. You just need to adjust the number of shards and secure sufficient computing power.
If you look at household ledgers, most are separated and used in yearly units. If the ledger is not separated in yearly units and figures were added on continuously, it would be difficult to look up specific dates. Separating it into years makes it easier to navigate. However, the balance remaining on December 31st of 2017 must be accurately copied over to January 1st of 2018. (Of course, the separation task for the database is not as simple as separating data into yearly units,)
QuarkChain says that they have solved the scalability issue by implementing sharding. The main chain is comprised of two layers: An elastic sharding blockchain (shard) is applied on the first layer, and the root blockchain, which checks the shard block, is applied to the second layer. They are currently operating a public testnet in countries including the US, Europe, and Singapore. The company claims to have realized a TPS above 14,000. During UDC 2018, CEO Qi Zhou said “QuarkChain is a high-performance P2P blockchain transaction system that provides high on-chain TPS. The current scalability issue faced by major blockchains can be resolved through high-capacity systems.”
◇ Side chains overcome the limits of blockchain
Side chains are similar to the Lightning Network. ‘Side chain’ literally means a chain on the side, but ‘side’ refers to connection and use, and not to a physical location. Side chains are similar to off-chains, but the main difference is whether the existing chain is used or not.
Main chains like Bitcoin and Ethereum are definitely innovative, but they have many limitations. The TPS falls vastly short of levels offered by credit card companies like Visa, and only Bitcoins can be transferred on Bitcoin blockchains. Plus, smart contracts can’t be coded on Bitcoin blockchains.
Side chains are chains that were generated to resolve these limitations of the main-chain. The Lightning Network focuses on fast payments, but the side chain is a scalability solution made to resolve various other issues as well.
Jason Goldberg, CEO of OST, introduced the DApp scalability solution ‘Open ST Mosaic Protocol’ at UDC 2018. This protocol is based on the meta blockchain technology that enables millions of transactions per second. Goldberg stated, “It is quite possible for non-blockchain companies to move existing applications to blockchains and hold ICOs to issue tokens without special development technology through OST’s new protocol.”
The main feature of Aelf is ‘high scalability.’ Its goal is to construct a parallel processing distributed computing blockchain platform using a multi-chain system. For fast transaction processing, Aelf uses a Delegated Proof of Stake (DPoS) consensus mechanism instead of the Proof of Work (PoW) method like Bitcoin. Its distinct feature is that it has an architecture comprised of 1 main-chain and multiple side chains that have consensus mechanisms that can be customized.
CTO Rong Peng emphasized this during UDC 2018: “Aelf provides the processing capability to quickly process transactions and appropriately separate resources required for customized consensus protocols and application operations. Especially for blockchain platforms where millions of apps are operated, we are paying the most attention to the separation of resources so that the running of important security programs are not affected by apps with a lot of traffic.”
※ Referenced speeches (The speeches can be viewed in their entirety on the UDC 2018 YouTube page)
- “Scaling Blockchain Economies to Thousands of Transactions Per Second” by OST CEO Jason Goldberg and CBS Benjamin Bollen
- “Empower Blockchain with Horizontal Scalability” by QuarkChain CEO Qi Zhou
- “Introduction to the technology of Aelf” by Aelf CTO Peng Rong
To read the next story: Guarding the ‘Trust’: Blockchain Security and Protection
*This post is a translated excerpt from Proof of Report UDC 2018 written by Ran Ko, CCO of Join:D, a blockchain media affiliated with JoongAng Daily.