by Zain Jaffer
If you have been immersed in the crypto and blockchain world for some time, you have probably come across something called the Blockchain Trilemma. It is a term coined by famous Ethereum cofounder Vitalik Buterin to describe the three considerations that need to be optimized for a blockchain to be great. Great means different things to different people. For some, one of the three considerations might not be important, so optimizing one of those might not rank with them.
Briefly the blockchain trilemma has these three considerations that should ideally be optimized. From the Coinmarketcap definition [https://coinmarketcap.com/academy/glossary/blockchain-trilemma], these are:
Decentralization. Rather than being managed by a single entity, blockchains distribute control over the network equally to all participants.
Security. Blockchain networks should have ironclad defenses that prevent malicious entities from taking over.
Scalability. Blockchains should support an enormous number of transactions and users without faltering by increasing fees and transaction times.
Let us discuss the last two first and save the first one for last.
Security is basically not having your crypto funds stolen or hacked. If you have a digital wallet filled with a crypto like Solana or Ethereum, and it is worth several thousand (or several million) dollars, of course you want it to stay in your account unless you transfer or sell it willingly to a buyer or recipient. Unfortunately at the present time, many blockchains still end up getting hacked and sometimes millions of dollars worth of funds are stolen. After catastrophic events such as these, the fund owners either have no recourse, or are reimbursed by the blockchain community while the chain is made more secure. Otherwise the chain fades into obscurity with a lot of arguments, and even civil and criminal suits if a fall guy (or persons) can be identified.
Scalability is basically not having to wait a long time to receive your crypto funds once you have transacted to send or sell these, or not get rejected when you are trying to, in the face of several million users. In short the blockchain should not bog down and be rendered frozen or useless because too many people are using the chain. In a scalable chain, the network can handle a massive number of users trying to transact at a given time. You may see an increase in transaction fees being paid, sort of like Uber surge pricing, if during peak usage times. But the blockchain network can handle it.
Decentralization is a bit more of an economic notion. A chain may be centralized and be fast and scalable. For many users used to traditional Web 2 (current Internet) applications like Google, Facebook, Twitter, and the like, this might not be a problem for them. Decentralization is basically a measure of how broken up or scattered the ownership of the network is. If a single company like Meta or Alphabet owns the network then it is centralized. However if, as in the case of Ethereum, there are one million independent validators ensuring the integrity of the chain as it operates, then it is decentrally owned (or decentralized).
The concept of decentralization is popular especially with libertarian types, who do not want the fund transfer/transaction mechanism of the blockchain to be censorable by third parties like banks, governments, central banks, dictators, and the like. If a chain or network is centrally owned, it is easy to put pressure on the Company owners whether it is from a government or some other institution. If the network is sufficiently decentralized, it becomes uncensorable. People cannot just be debanked for example.
Part of the roots (not entirely) for the importance given to decentralization was the feeling in 2008 that Wall Street had taken advantage of Main Street, throwing many ordinary people out of work after the subprime mortgage crisis. It was not coincidence that during this period, Satoshi Nakamoto, the pseudonymous creator of Bitcoin, published the white paper [https://bitcoin.org/bitcoin.pdf] that year. Three years later in 2011 when the economic impact had become widespread, the Occupy Wall Street movement gave a voice to the ordinary person disenchanted with centralized control of finance and the economy [https://time.com/6117696/occupy-wall-street-10-years-later/].
Even Russian President Vladimir Putin admitted in 2024 that something like Bitcoin cannot be censored or stopped [https://www.coindesk.com/policy/2024/12/04/putin-says-no-one-will-be-able-to-ban-cryptocurrencies-state-media]. This is because there are too many owners of the network globally, and it is simply impossible to ban actress to all of those, unless a country totally stops Internet access.
Knowing what the blockchain trilemma is becomes useful if you want to understand the different types of crypto and blockchains. Whether you are an investor, user, commentator, recipient, the way that a blockchain responds to the trilemma questions will determine your experience with it.
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