The blockchain trilemma: Can it ever be tackled?

Blockchains must balance between offering the best secure and scalable infrastructure while still staying reasonably decentralized. Is this a realistic future for Web3? 

A fundamental building block for blockchains is decentralization, a functionality that enables people to transact without the requirement of a central authority. This formed the crux of the Bitcoin (BTC) white paper that Satoshi Nakamoto published in 2008. It serves as the base for any Web3 product from a network and ethos vantage. 

However, as more people flocked the chain, a couple of other functionalities seemed crucial, scalability and security. While Bitcoin is considered the most decentralized of all networks, its transaction speed does not make it conducive for building applications on top of it and this is what other layer-1 chains capitalize on and strive to solve. 

While the creators and developers of L1 networks claim about them being the most secure, most scalable and most decentralized network of all, is that the case? Can blockchain networks be created with equal emphasis on decentralization, scalability and security? 

If yes, then the blockchain trilemma will cease to exist. But, sadly, that is not the case and almost all L1 networks fail to cater to all three aspects, leaving the door open for a pioneer to solve blockchain’s biggest challenge, albeit the biggest money spinner. 

Let us look at three top L1 networks, Bitcoin, Ethereum and Solana and assess them across the three dimensions namely,  decentralization, scalability and security.

Studying the priorities of Bitcoin, Ethereum and Solana will help shed light on how these priorities affect the properties of a blockchain. Decentralization is the ability of a blockchain network to distribute governance through its consensus mechanisms.

True to its ethos, Bitcoin remains the most decentralized of all L1 chains due to its adherence to proof-of-work (PoW) and a lack of central authority controlling the development and governance ensures this. While Ethereum and Solana claim to be decentralized, are they as decentralized as Bitcoin? The answer is probably not.

Solana’s token allocation is heavily centralized, with venture capitalists, developers and Solana Labs owning close to half of the fund allocated. This has drawn criticism from many Web3 evangelists and thought leaders about Solana trudging away from the ethos of Web3. It has also been affected by the FTX collapse more than Bitcoin and Ethereum because of the token allocation.

Comparatively, Ethereum as a network is more decentralized than Solana. However, it still lacks Bitcoin’s decentralization advantage. Ethereum also has several vectors of centralization like cloud infrastructure, maximum extractable value (MEV) and the proof-of-stake (PoS) consensus mechanism.