Scalability and Interoperability Limitations of Existing Blockchain Networks

Scalability and interoperability hinder the vast adoption and sustainability of blockchain-oriented solutions. Sharding is one of the most practical solutions, to reduce the overhead of duplicate communication, storage and computation, and is widely employed. As the size of the network increases, high latency, low throughput and weak robustness are observed.

Directed Acyclic Graph (DAG) allows to position of many blocks at once where transactions are linked to one another in the form of a graph. This approach resolves speed and scalability issues but at the expense of security and centralization.

The performance of the blockchain can also be improved using Off-chain solutions. Off-chain stores and data processing occur on a separate publicly inaccessible blockchain and broadcast a summary of a batch of off-chain transactions to the main blockchain. Privacy and security issues have been identified in the off-chain solutions.

Similar to off-chain are cross-chain solutions with the difference that they facilitate interaction among multiple cross-chainchain networks. In such solutions either a trade-off between scalability and centralization is observed or privacy and locked funds are the concern. Another method to offload computation and increase scalability is through mobile computing. Resource orchestration is the critical aspect of mobile computing which can be managed through optimized resource allocation algorithms.

Out of the very limited solutions being proposed under this category, trade-offs between latency and security or support for multiple heterogeneous applications have been identified as issues. Table 1 lists the scalability projects under varied scalability solutions.

Table 1 Scalability Solutions and Projects

Interoperability solutions can be categorized into three-generation solutions as depicted in Table 2.

The first generation of blockchain interoperability solutions identifies and describes different interoperability strategies across blockchains including sidechain and relay approaches, notary schemes, and hash time lock contracts.

Sidechains are an extension of the main chain where the communication protocol facilitates asset transfer between the two. It does not allow horizontal communication among the sidechains resulting in an inconsistent state in the closure phase. In relay solutions, relayers keep track of the block headers of the mainchain and input them to the relay smart contract hosted on another blockchain. These block headers can be used for verification of transactions or information.

Bad actors can then take control of a potentially small set of validators. Increasing the validator set can result in slow transaction settlement. Notary schemes are fundamentally intermediaries between blockchains as they execute actions on behalf of the end-users or facilitate matching for the end users with trade offers. Such solutions are preferred for cryptocurrency exchanges where an order book is managed, and buyers and sellers are matched.

Hashed Time-Lock Contracts (HTLCs) enable atomic operations between different blockchains using hashlocks and timelocks allowing asset exchange without a pre-existing trust relationship between the two different blockchains. The protocol and governance in HTLC implementation are different across existing solutions which results in blockchains becoming siloed.

Table 2 Interoperability Solutions and Projects

The second generation of blockchain interoperability solutions provides the ability to create application-specific blockchains that can interoperate between the customized blockchains. This generation of blockchain interoperability solutions uses strategies of bridge or hub-and-spoke- spoke which also introduces limitations. A few of these solutions are highly experimental products. The third generation of blockchain interoperability solutions known as hybrid connectors attempts trust toto deliver a blockchain abstraction layer in which a set of uniform operations can be exposed to allow an interaction between blockchains without the need to use different APIs. Under this category, some solutions are not entirely decentralized, and a few connectors trust to use on the connector.

L1X provides a scalable and interoperable solution without compromising on security and decentralization as detailed in subsequent sections.

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