As an analyst with a background in economics and experience in the blockchain industry, I strongly believe that the decentralized nature of blockchains is their most significant value proposition. Therefore, any scaling solution must prioritize maintaining the core principles of decentralization and resilience while addressing the need for increased throughput.
As a researcher in the field of blockchain technology, I can affirm that the need for scalability is universally acknowledged. However, there exists a significant debate within the industry regarding how best to achieve this goal. This discourse is often referred to as the “modular” versus “monolithic” discussion. It’s an intriguing and sometimes heated debate, which adds to the richness of our ongoing exploration in this dynamic field.
As a researcher studying scalability solutions in blockchain systems, I’ve come across modular scaling as an approach that involves moving smaller transactions to tiered layer-2 and even layer-3 solutions before settling on a base chain. Ethereum (ETH) community is one of the proponents of this method. However, I’ve noticed a significant downside: fragmentation of the network and subpar user experience.
Monolithic scaling, as demonstrated by Solana (SOL), involves processing all transactions on a single chain and enhancing network performance through hardware, software, and consensus modifications for increased capacity. The major advantage of this method is delivering an enhanced user experience. However, the primary disadvantage lies in its inability to maintain decentralization and resilience without compromising these essential blockchain features.
Advocates of the monolithic approach frequently misunderstand the essential function of a permissionless chain. It’s not about processing transactions — that’s what centralized systems are designed for. Instead, decentralized networks offer a valuable and limited resource called secure blockspace. Consider it as the fuel, but for a decentralized economic system. Like all scarce assets, secure blockspace has a finite supply. However, demand can change, so the market price determines who gets to utilize it.
An age-old quip in the commodities market posits that “high oil prices serve as a remedy for high oil prices.” While this may seem paradoxical, it holds merit. In the long term, elevated prices can stimulate increased production, even if there isn’t necessarily more raw material to extract. Most significantly, higher prices act as a deterrent to current demand. They compel consumers and industries to optimize their usage and eliminate smaller users who cannot afford these prices.
It’s understandable that this approach may appear unjust, but the primary objective here is enhancing productivity rather than ensuring fairness. An outside entity such as the government could intervene by either regulating fuel distribution or providing subsidies. However, these methods have their shortcomings. Rationing can result in extended queues and chaos, whereas subsidies may lead to excessive consumption and misuse. Consider a situation where children are taking a joyride versus a factory that requires consistent operation – the former is not contributing significantly to overall efficiency.
Currently, Solana faces significant pressure due to heightened demand fueled by the memecoin craze. Consequently, this has resulted in a high number of failed transactions. In an attempt to resolve these issues, users have persistently attempted to submit their transactions, unfortunately compounding the problem. Unlike other networks, Solana lacks an explicit transaction queue. However, it seems that an informal queue has emerged as a result.
This is what you’d expect to happen if secure blockspace is priced too cheaply.
Modular chains offer various levels of secure block space with distinct pricing for different users. For instance, Ethereum costs approximately $20 to carry out a transaction, whereas Arbitrum only requires a few cents. Solana, however, aims to ensure the same level of security for a $1 trade as for a $1 million transfer, even though the former is comparable to children going on a joyride and may not require such extensive protection.
As a crypto investor, I’ve noticed the ongoing efforts of Solana developers to enhance their fee markets for improved responsiveness to demand. However, I can’t help but express concern that, if successful, these upgrades might make it harder for smaller traders to participate during peak times due to increased fees. Unlike investors on modular chains, we on Solana won’t have the luxury of easily switching to other networks when fees become unaffordable.
As an analyst, I’ve noticed that other developers are exploring methods to expand our network by enhancing software and acquiring faster hardware. However, they might not be aware that this approach could actually attract even more small-value transactions. The demand for a scarce good can be insatiable if the price is deemed affordable enough. This phenomenon was evident during the Soviet Union era when subsidized bread led people to feed it to their animals rather than consume it themselves.
Simultaneously, the centralized core network infrastructure grows more vulnerable and prone to instability. An intricately tuned system designed for maximum efficiency may be more susceptible to failure, as Solana experiences from time to time.
While the monolithic method for scaling may have noble goals, its results fall short – particularly when prioritizing decentralization and resilience.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of CryptoMoon.
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2024-04-30 00:48