Blockchain Scalability Solutions: Lightning Network and Sharding
By: Shahab Behzadi
Tags: Lightning Network, Bitcoin, Xsn Articles, Xsn News, Blockchain Sharding

Abstract

This article will explore Blockchain scalability issues and will review potential solutions, including Lightning Network and Sharding. The first section will outline the importance of scalability for adoption, with a focus on transaction throughput and long confirmation times. Next, there will be in-depth looks at Lightning network and Sharding network, including a compare/contrast section explaining the pros and cons of each. Conclusion will include that Stakenet is exploring the implementation of sharding into their infrastructure.

Solving Scalability

Blockchain’s Scalability Issues

Anyone who has been involved in the crypto space for any amount of time is familiar with blockchain as a technology used for validating transactions. Nearly every crypto from Bitcoin to Stakenet to Doge utilizes different protocols that allow for simple and efficient movement of funds. But why limit this technology to a monetary transaction? Blockchain has the potential to revolutionize much more than finance. Author and college professor Don Tapscott wrote in an article for the Harvard Business Review, “Blockchain could transform business, government, and society in…profound ways.” He goes on to describe how blockchain could even impact other industries, including the music industry, manufacturing, and more. Check out this article by CB Insights, to learn more about how evolving blockchain tech could transform nearly every industry.

But as blockchains are rolled out in an increasing number of test programs across many different use cases, there is one issue that poses challenges for mass adoption: scalability. The term “scalable” is typically used in one of two ways: the ability to be applied in a range of capacities, and the ability to be changed in size. While we have established that blockchain is extremely scalable in the former sense, it has struggled in the latter.

In early 2019, an academic paper was published by Evangelos Georgiadis on the theoretical limitations of Bitcoin’s current protocol. Georgiadis concluded that Bitcoin’s theoretical processing capacity tops out around 27 transactions per second. This number is calculated by determining how many transactions are capable of fitting in Bitcoin’s limited block size. To look at all of the math, here is a link to the academic paper. This theoretical number pales in comparison to Visa’s 65,000 per second (powered by its 119 data centers). This comparison is even worse when considering that Bitcoin’s actual throughput is between 3.3 and 7 transactions per second. If Bitcoin is ever going to reach the “mass adoption” that its holders dream of, the scalability issue is one that must be addressed.

Addressing Scalability

One of the main contributors to this issue is Bitcoin’s long block time of 10 minutes, and the block size limit of 1 megabyte. Bitcoin developers have long debated potential solutions to this problem, with proposals ranging from block size increases to “two-layer” protocols. SegWit2x was a popular potential solution, and planned to implement a two-part plan that would utilize witness nodes as well as hard fork the blockchain to support a larger block size. However, the SegWit2x developers announced on November 16, 2017 that the plan would not move forward due to a lack of consensus. (Note: SegWit2x is not to be confused with Segwit, which was successfully implemented on the Bitcoin blockchain on July 21, 2017 via a soft-fork.)

Another popular solution for the Bitcoin network is the implementation of the “Lightning Network”, a highly scalable second layer protocol that would allow for cheaper and near-instant transfer of funds. While the Beta version of the LN is functional, it is still in testing and its success remains to be seen.

Sharding

While Bitcoin and other Proof of Work Cryptocurencies squabble over the best solution to low throughput, many cryptos are innovating behind the scenes through the implementation of sharding. The term “Sharding” is common to the database realm, and is used to increase server-side efficiency. In Databases, a “Shard” is a “slice” of a database, with each respective portion stored in a different server, thus spreading the workload. Now, blockchains function differently than a Database, but the same fundamental principle can still apply. Instead of all data portions being stored in each node, when sharding is implemented each node will only store a portion of the block data, thus spreading the “work” of the blockchain across participating nodes.

Concerns have been raised about the chain security, if the portions of the chain are partitioned across multiple shards. By nature, blockchains are susceptible to 51% attacks, which can only occur if a user obtains 51% of the chain consensus (or validators). In this scenario the blockchain history could potentially be re-written, effectively giving the attacker total control of the supply. But when a chain’s data is broken into separate shards, the percent of consensus required to conduct such an attack decreases fractionally. For example, if a chain employs ten separate shards, the percentage of the consensus required to conduct such an attack would be 5.1%. However, in order for this to be damaging, all 5.1% of those validators must be working on the same shard.

The key to maintaining shard security is randomizing which shards a validator node is placed on, so as to prevent these attacks from occurring. Assigning and re-assigning validators to different shards is a complicated process, and requires a lot of computation in order to ensure the action is truly random. Most sharding designs utilize a separate blockchain to accomplish this “random assignment” function, as well as to bridge between the separate shards through taking snapshots and receiving updates. This chain is commonly referred to as the Beacon chain.

Lightning Network

In lieu of executing a “hard” or “soft” fork of the Bitcoin blockchain -a move that would be difficult and messy to accomplish- many have proposed implementing a second layer protocol to the Bitcoin blockchain. This is essentially what the lightning network is. The term “second-layer” means that the Lightning Network is built on top of the already existing Bitcoin blockchain, the LN is not a chain in and of itself. This network allows users to send their Bitcoin directly, without going through the slow and cluttered Bitcoin network. Some estimates indicate that if implemented correctly, the Lightning Network could support a throughput of 50,000 transactions per second, a number that is comparable to what VISA boasts today. The Lightning Network website boasts that the technology has the potential to support “millions to billions” of transactions per second, blowing away the max throughput of the competition.

Not only will the implementation of the Lightning Network drastically increase transaction speeds, it will also significantly reduce the traffic on the very congested blockchain. Since transactions will be supported through the second layer protocol, recording them on the chain is not necessary, so long as that payment channel remains open. As soon as the direct peer-to-peer channel is closed, the final balances are recorded on the chain. This will hopefully reduce the 300,000 average daily transactions that clutter the Bitcoin chain.

Compare/Contrast

In the simplest possible terms, the lightning network provides an “off-chain” solution to Blockchain’s scalability problem, while Sharding provides a non-traditional “on-chain” solution to the problem. Both of these protocols have the capacity for enormous transaction throughput, and both are viable options, though both are still in the relatively early stages of development in the cryptosphere. However, the most hardcore of crypto purists will likely not find either solution to be satisfactory, since both deviate from the traditional methods of storing the entirety of the blockchain data on each individual node.

Stakenet and Emerging Crypto Technologies

While Stakenet has already begun implementation of the Lightning Network into its protocol as a second-layer to power its DEX and Lightning Swap features, the research team is investigating Sharding to incorporate it into the first layer, as it’s still early stages of implementing Sharding technology in a blockchain. These two technologies will integrate seamlessly to create an incredibly fast, lightweight and virtually infinitely scalable network. Incorporating sharding will also allow the easy implementation of Smart Contracts through a dedicated network shard. Considering that these powerful technologies will be paired with the strictest of privacy protocols, the blockchain behind Stakenet is truly on the cutting edge of the industry.