have given us ways to exchange value without intermediaries, they have failed to beat the traditional
options regarding scalability. In fact, most available blockchain solutions
today have low transaction speeds and high transaction fees.
scalability may soon be an issue of the past with the latest disruptive solutions.
The Proof-of-Work Approach
In order to understand what is needed to
successfully scale blockchain solutions, we first need to have a clear picture
of the issues that exist with the major blockchain consensus protocols.
Proof of work is the validation protocol used by many cryptocurrencies such
as bitcoin, where mining devices verify transactions by competing to solve
The process gets
harder with increasing transactions and requires a lot of computing power, as
well as large amounts of memory space. This is why Bitcoin transaction speeds are
slowing and fees keep rising with increasing adoption. In the proof-of-work
approach, transactions are stored in blocks that have a size limit of 1
megabyte. As the number of transactions keeps growing, the block tends to fill
up, reducing transaction speeds.
Some believe that simply increasing the block size offers a solution. But
because transactions on the Bitcoin blockchain are
expected to grow exponentially, increasing the block size only provides a
short-term reprieve. As the world continues to adopt this blockchain, it is
possible that there will come a time when a block cannot be expanded anymore. Increasing the
block size means increasing the amount of data needing to be validated within a
short amount of time in which a new block is created. This means
using enormous amounts of computing power that can only be affordable to big
mining pools, which can then potentially gang up and take control of the
blockchain, locking small miners out and defeating the Bitcoin blockchain’s
primary purpose of decentralization.
The block size
increase debate has been going on for a long time in the community with some proponents
breaking off to form the likes of Bitcoin Cash.
The Proof-of-Stake Approach
Proof of stake addresses the computing power need by introducing a mechanism
where validation is done through the random selection of a node. The chances of
a node being selected increases with the amount of stake in the project that a
When a node is
selected, its stake acts as a collateral of trust to validate the block —
meaning that if a node validates a false transaction, it risks losing its
stake. The approach is less energy intensive than the proof-of-work mechanism
and, therefore, it incurs fewer transaction fees.
The problem with
proof of stake is that it does not address blockchain growth. Also, by
selecting block validators by their stake, the process compromises
decentralization because the rich control the validation and they keep getting
richer as they validate more blocks.
of assignment, a mining method developed by the IOTW team, tackles some
of the scalability challenges associated with proof of work and proof of stake
through what is known as “micromining.” The process involves a random selection
of a limited number of candidates to solve cryptographic problems.
In the proof-of-assignment
method, the ledger is not stored in the mining devices and therefore takes up
very little memory space on a user’s device.
power and memory requirement make proof of assignment practical for
unspecialized day-to-day use. The IOTW project is focusing on incorporating its
blockchain in IoT devices and will facilitate fast transactions between IoT
devices, also enabling them to participate in crypto mining.
efficient blockchain scalability approaches are those that address transaction
fees and data storage simultaneously. While the POS mechanism has reduced
transaction fees by lowering the costs of crypto mining, it compromises the
main essence of blockchain technology, which is decentralization.
Even though the proof-of-assignment
method is explicitly designed for IoT devices, it may open a way for others to
follow in making blockchain technology useable in practical everyday use.