How Bitcoin solves the Blockchain Trilemma
By: Gianmarco Guazzo
Tags: Lightning Network, Startup, Blockchain, Technology, Bitcoin

How Bitcoin solves the Blockchain Trilemma

When, in 2017, the bitcoin community activated SegWit, thus enabling second-tier solutions such as the Lightning Network, the cryptocurrency world changed.

The protocol created on top of Bitcoin to solve the scalability problem has allowed the cryptocurrency to answer one of the questions that plague the world of Blockchain. We try to analyze the relationship between these two protocols and how one is strictly necessary for the other to create, on paper, a perfect ecosystem.

What is Lightning Network (LN)?

Lightning Network is the solution of the level (or layer) 2 of Bitcoin that allows almost instant transactions, with very low costs, based on the idea of ​​a two-way channel. Like the underlying Blockchain, it is equipped with peer-to-peer exchanges which, however, allow you to exchange money even in a network of channels that do not delegate the custody of funds. The transactions are off-chain, apart from the first and last which serve as “certification” of the balance for all the others.

In this way, Bitcoin has potentially found the solution to its scalability needs, having the possibility of reaching a quantity of tps tending to thousands if not millions. The solution proposed by Joseph Poon and Thaddeus Dryja in 2016 with the paper “The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments” added the last piece to solve the famous Blockchain Trilemma.

What is the Blockchain Trilemma?

The Blockchain trilemma is a condition that concerns the three fundamental principles of technology, namely security, scalability and decentralization. Initially expressed by Vitalik Buterin, the trilemma states that all Blockchains can solve only two of the problems just mentioned.

The example of Bitcoin is emblematic: until 2017, Bitcoin was a decentralized and safe currency but extremely slow in processing a large number of transactions. The low scalability of the Bitcoin Blockchain is due to the construction of the same, which allows creating a wall to protect the cryptocurrency. Bitcoin’s consensus algorithm (Proof of Work) does not allow it to scale exponentially like others (eg Proof of Stake), but on its side, it certainly has the security and durability that make it the safest from attacks of any guy.

To solve the Trilemma, and thus become an ideal Blockchain, the protocol created by Satoshi Nakamoto necessarily had to scale. So in 2017, when the second tier solutions were introduced, Bitcoin implicitly became a complete machine. Obviously, LN is still a project in development, but the potential here is virtually endless.

From Gold 2.0 to Retail

If cryptocurrency is currently attracting the eyes of institutional investors and traders and the whole world, when it goes mainstream it will do the same with the entire retail world. Once tested and made stable, Lightning Network is the improvement that can bring micropayments and instant BTC transactions into everyday life.

If the Bitcoin’s Blockchain is the register for gold 2.0, and now it is no longer nerds who say it but also banks, payment channels and LN represents the necessary financial infrastructure to scale globally.

The on-chain transactions will be used exclusively for certification purposes, to transfer large amounts of money or for direct exchanges that do not require payment channels.

Bitcoin is not a static protocol but on the contrary, since its inception it is constantly evolving, bringing decentralized network architectures into a world that has always conceived them with the intermediary as guarantor. LN represents the second step from which other solutions will derive to make the protocol ready for the general public.

Conclusions

Bitcoin’s is and will be a slow and epochal change. Bitcoin is not a technology, it is a revolution. The resolution of the Trilemma is only the first of the various Milestones that will be reached by the cryptocurrency in a few years. Don’t expect to see Wallet with Lightning Network in everyone’s hands tomorrow. The transition will be gradual, giving developers the opportunity to make the complex network of IT and non-IT rules through an age-proof UI (User Interface).

The future is here, it is evolving, and it is not in the hands of states or banks but in ours.

For the first time, you have a choice.