Founder of Ethereum Vitalik Buterin claims he has found the ultimate solution to the problem of scalability haunting cryptocurrency networks. That will be made possible with lightning networks and sharding.

The reason why scalability is such an important issue is that in a regular blockchain, say, the bitcoin blockchain, each computer has to validate every transaction, said Buterin during a recent meeting with the Coinbase team. This is, in fact, the core principle of blockchain that makes it such a reliable transaction facilitator. But hence the problem: the whole network, in effect, cannot be more powerful than each of its computers.

Ethereum will receive a solution that will allow the platform to increase the number of transactions infinitely, claims the developer. 

One of the ways to do that is to implement “lightning networks”. The idea is that not every single transaction is broadcast through the distributed ledger: the blockchain is only involved in the event of non-cooperation. This can be compared with judicial proceedings in the real world: they only take you to court if they are offended. Thus, participants of the blockchain won’t have to validate your transactions as long as everything is all right.

Another method Ethereum is going to implement is sharding. This means splitting a huge database into a network of smaller ones. (The diagram showing what it will look like can be downloaded together with Buterin’s presentation.) The process will include several stages. After the initial basic sharding (which will result in the implementation of Ethereum 2.0) Ethereum 3.0 will be developed – a blockchain system that will be capable of infinite sharding.

This will be backed by a gradual transition from PoW to PoS (employing a hybrid model in between to smoothen the path) through the introduction of Casper contracts. They will enjoy an improved consensus mechanism labelled “consensus by bet”. 

“Bonded validators make transactions called “bets” that give them profit in some histories at the expense of loss in other histories. The process converges, and over time one history becomes favored,” writes Buterin explaining the new principle. 

As a result, just one history will eventually be validated.

All these measures are supposed to dramatically increase the network’s scalability. According to the developer, each computer will in effect store no more than 0.1 – 1 % of all the transactions. That will lead to a system with no full nodes at all.

Alongside with the issue of scalability, Buterin touched on the problem of privacy. Ethereum with its 100+ decentralised applications is positioned itself as a huge “world computer”, but it currently lacks privacy, one of the main advantages a personal computer has. And the clients of the company, both private users and financial organisations, are likely to suffer from that. 

One of the solutions offered is a system of linkable ring signatures. This will be good for voting, claims Buterin. Within this system, you can put your signature and it will not be attributed to you personally, but only to a certain group you are a member of. The system does not detect that it was you who put the signature, instead, it will know that one of your group has done it. But double-voting is impossible: if the same individual tries to put their signature twice, the system detects it.

Ethereum is a decentralised platform that runs smart contracts. It was crowdfunded in 2014 and is run by the Swiss nonprofit organisation Ethereum Foundation.

Andrew Levich