Does blockchain face scalability limitations?
Through a special arrangement, presented here for discussion is a summary of a current article from the blog of Nikki Baird, VP of retail innovation at Aptos. The article first appeared on Forbes.com.
For retailers, the barriers to blockchain adoption might involve wrestling with privacy issues or ease of use, but the initial roadblock may be performance. In blockchain, performance really comes down to scalability — the ability to handle a lot of transactions (defined as adding new blocks to the blockchain) all at once.
Scalability is critically important in retail with payments and programmatic advertising.
Whether with traditional currencies backed by blockchain technology or with cryptocurrencies specifically, processing a consumer payment in retail should be no slower than it is today. To get adoption, it probably needs to be faster. Visa reports that its transaction capacity is 65,000 per second. Bitcoin, so far, has maxed out at 4.7 transactions per second, and Ethereum is estimated to have maxed out at 15 per second, again “so far.”
In programmatic advertising, it’s an even more acute problem. The lightning-quick decisions that go into what advertising to load when you view a web page can sometimes involve dozens of parties, all operating in miniscule fractions of a second. Google alone processes about 40,000 searches per second on average.
Another place where volume and speed matters will be supply chain, as blockchain is being examined as a possible way to handle massive volumes of IoT-generated data and keep track of it across multiple partners.
The issues around performance are not so easy to unwind. With Bitcoin, it’s not just about the numbers of transactions per second, it’s about the amount of electricity required to generate that kind of capacity — estimated to be as much energy as what Denmark consumes in a year. Some blame it on network latencies, and some are also looking for consensus algorithms and/or hashing methodologies (part of what governs when and how a block is added to the chain) that are more efficient, which would help both capacity and electricity consumption.
For now, for blockchain to truly achieve retail adoption, performance as it stands is not good enough, and many of the underlying technology debates suggest there is still room for step-level improvements to come, both in terms of speed and efficiency.
- Three Big Blockchain Technology Challenges That Impact Retail – Forbes
- Visa Fact Sheet – What you need to know about one of the world’s largest payments companies – Visa
- Proof of Selection: A Better Alternative to Proof of Work – Medium
- Blockchain and Its Implementation Challenges – Networkcomputing
- The blockchain scalability problem – Coinrivet
- Google processes 40k searches per second. On average, a web server can handle 1000 requests per second. Does that mean Google can run using only 40 web servers? – Quora
DISCUSSION QUESTIONS: Can blockchain be scaled enough to handle retail volumes, whether for payments, marketing or IoT? Do you see the technology overcoming any limitations in the near or long term?