A Comparison of Blockchain Platforms — Part 1: Competitors
By: Jonas Bostoen
Tags: Ethereum, Cryptocurrency, Scalability, Bitcoin, Blockchain

A Comparison of Blockchain Platforms — Part 1: Competitors

This is the second part of the series. In this post I’ll discuss some of the competitors, and explain on what points I’ll be evaluating them. Enjoy.

Before we start, I want to get something out of the way. A lot of people seem to think the blockchain platform competition will be winner-take-all. I do not think this will be the case, and for good reason. Many platforms focus on different aspects, some on speed, others on privacy, and yet others on ease of use. Besides, a multinationally dominant blockchain to me seems out of the question, the world is still too divided for that. Countries have their own rules and principles, therefore one blockchain will be preferred over another in one country, and the opposite will happen in another.

Developers themselves will also have their preferences. There may be a blockchain that is incredibly efficient towards end-users, but not one developer likes the smart contract language. These are trivial examples, but they serve a point. This is not a winner-takes-all case.

Blockchain 2.0

In my previous post, we discussed the transition from Bitcoin (blockchain 1.0), to Ethereum (blockchain 2.0). Now that you understand the why of it all, we can begin tackling some of the hurdles that Ethereum faces. These hurdles will serve as the evaluation points for different platforms.

You’ve probably heard of CryptoKitties. CryptoKitties are what’s known as cryptocollectibles. Think of it as collectible card games — they don’t really have any intrinsic value but people are willing to pay for them anyway. At one point in time there was so much hype around CryptoKitties that the Ethereum network couldn’t keep up. Fees skyrocketed and transactions took way too long to confirm. Some ICOs even had to be rescheduled due to the network being clogged. This points out a very important bottleneck: scalability.

How to kill the Ethereum network:

Scalability

Trade-offs

Visa, on average, handles 2000 transactions per second (tps), with a peak rate of 56,000 tps. For comparison, Ethereum, in its current state, can handle about 20 tps, while Bitcoin can only handle around 7. That’s insanely slow. It is, of course, easy to compare a centralized payment processor to a decentralized network, but it provides some contrast. It’s clear that scalability is a real problem, and it’s going to get worse if solutions are not found, since I believe these networks are only going to grow bigger.

When talking about blockchain scalability, it would be stupid not to mention Vitalik Buterin’s trilemma. The trilemma consists of these aspects:

Scalability,

Decentralization,

Security

Vitalik says that a particular blockchain can only have two of those, while sacrificing the other. I consider it less absolute, and I’ll illustrate what I mean.

Visual representation of the blockchain trilemma

By using a triangle, visualizing this trilemma becomes much easier. Each of the corners represent one aspect, and the surface area can be thought of as the overall quality.

Case 1: perfect mesh. The first triangle is an even triangle, it has as much of each aspect as is currently possible. If I had to ascribe Ethereum to one model, it would be this one.

Case 2: underperforming. This model is a bad one. It is not as decentralized as it can be, while not even improving one of the other aspects.

Case 3: scalable. In case 3, the blockchain clearly prefers scalability over decentralization. While the quality surface stays the same, I would argue that decentralization is the most important aspect of blockchains, and that they shouldn’t be sacrificed — even partly — for speed. NEO can be ascribed to this model.

Metrics

It’s important to realize that scalability is not a singular metric, but it’s a combination of various performance and security metrics.

I found it most useful to break scalability down into these two bottlenecks: throughput and latency.

Throughput : The maximum throughput is the maximum rate at which a blockchain can confirm transactions. Bitcoin’s is ~7 tps, while Ethereum’s is ~20 tps. This number is defined by maximum block size and block frequency/block time (every 10 minutes for Bitcoin, and every 15 seconds for Ethereum).

: The maximum throughput is the maximum rate at which a blockchain can confirm transactions. Bitcoin’s is ~7 tps, while Ethereum’s is ~20 tps. This number is defined by maximum block size and block frequency/block time (every 10 minutes for Bitcoin, and every 15 seconds for Ethereum). Latency: The time it takes for a transaction to confirm, with a transaction being confirmed when it is included in a block (the average block time).

When comparing different platforms on their ability to scale, we’ll have to dig into these two components. Whether a blockchain is scalable or not largely depends on which consensus mechanism it uses. Let’s talk about those next.

Consensus Mechanisms

Consensus mechanisms are being innovated on all the time. When we talk about different platforms, you’ll see a lot of different consensus systems popping up. Let’s go over the two biggest ones: Proof of Work and Proof of Stake.

You’ve all heard about bitcoin mining. You probably also know that it is the act of securing the network and appending transaction data to the blockchain through solving hash functions. Incentivized to do so by the block reward, a certain amount of bitcoin that are given to the miner that solves the block. This number halves every four years, which will cause inflation to completely stop when there are 21 million coins minted in 2040. This is all part of a consensus mechanism called Proof of Work, the original bitcoin consensus mechanism.

When a miner solves a hash, it broadcasts the solution to the rest of the network. These other miners then verify that it is indeed correct, and when the majority of the network agrees, that block is added to the chain.

PoW is incredibly secure — in order to consistently mine the last block as an entity, you would constantly need more hashing power than the rest of the network. If one were to try and change earlier blocks in the chain, to, for example, manipulate their balance, one would have to rework the solutions to the entire chain that comes after the targeted block. Think of it this way: multiply every block you want to change by the power it takes to consistently mine one. It’s now pretty obvious that after a certain amount of subsequent blocks, one block becomes immutable. To see this in action: here’s an awesome website: https://anders.com/blockchain/blockchain.html

Although Proof of Work is secure, you can see some problems when it comes to scalability: every miner in the network searches for that one block at the same time, and when the block is solved, they just restart from zero.

In primitive PoW systems the mining network also tends to get more centralized over time: as a miner, you have to download the entire blockchain history. If this history is too long, only miners with enough resources will be able to sustain the network, which will lead to some form of centralization. If a person was to mine for a mining pool however, the mining pool would just send you whatever you are supposed to work on, without having to own the entire history. Keep in mind that mining pools are a form of centralization as well, though.

Proof of Work and Proof of Stake simplified. Source: Blockgeeks

Currently, the two largest blockchains are both Proof of Work. Ethereum, however, is planning to switch to Proof of Stake completely some time in the future with its Casper implementation.

Proof of Stake is a consensus algorithm that depends on a validator’s (not miner) economic stake in the network. A set of validators are deterministically chosen to vote on a new block, and the weight of a validator’s vote is determined by the size of its stake. Staking is the act of sending a certain amount of coins to a staking smart contract that will lock them up. As a validator, you then get to vote on and create new blocks. The security of Proof of Stake lies in the economic incentive — if you would choose to cheat, your stake is destroyed. In the words of Vlad Zamfir:

It’s as though your ASIC farm burned down if you participated in a 51% attack.

Since staking is not as resource-demanding as mining, the reward doesn’t have to be that big. Validators get rewarded by transaction fees proportionate to their stake in the network, and not by block rewards (therefore mitigating inflation). It is also a lot more energy-efficient, which is a common critique towards Proof of Work based networks.

Proof of Stake also allows for more scalability through sharding. Remember, in today’s permissionless blockchains, every single miner (PoW) or validator (PoS) is working to add a block to the blockchain. This results in a really bad property:

S = c * 1/n where:

S = speed/scalability

n = size of the network/number of nodes

c = constant number

Ideally, we could somehow reverse that inverse correlation, to make the network faster with increasing size. This is possible with sharding.

Sharding allows for groups of validators to each work on their own set of transactions. Suppose a Proof of Stake network consists of 9 validators. When a transaction is broadcast, they all vote and stake accordingly, so when transactions are sent, they get solved linearly. With sharding, however, the network is divided into three groups/shards: A, B and C, all consisting of three validators. These groups can work on their own set of transactions in parallel. Now, the network speed increases with the number of validators.

There is a lot more to these consensus mechanisms than we’ve currently seen, but in the following parts, we’ll stumble upon more and more different aspects when talking about particular blockchain networks.

Some blockchain platforms that will be talked about in the series (besides Ethereum), according to market capitalization:

EOS

Cardano

Stellar

NEO

Qtum

ICON

Lisk

Stratis

Waves

RChain

Zilliqa

Aion

Komodo

Ark

Nebulas

Dragonchain

And more, to be requested in the comments

That was it for this part. Hope you learned something, and I hope you’re as curious as I am towards these platforms. It will definitely be interesting to watch how the future will unfold regarding this sector.

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