Source: Crypto Slate
The Advantages and Disadvantages of Off-Chain to On-Chain Scaling
In recent years, major blockchains like Ethereum and Bitcoin have witnessed massive debates within their communities. One of the biggest and most-heated debates that persists to this day is the issue of scaling. The difficult thing about the cryptographic and economic systems behind blockchains is that there is an intricate balance within the ecosystem that is difficult to maintain at larger scales. This is one of the biggest hurdles impeding blockchain technology from its goal of disrupting industries at a global scale.
The grueling protocol debate process
Blockchain’s growing pains have divided cryptocurrency enthusiasts the world over, with two main factions forming: those who advocate upgrading the blockchain itself, also referred to as on-chain scaling; and those who push for off-chain solutions. In both Ethereum and Bitcoin, these are the two major options.
While there are only two main categorizations of contending proposals, deciding on an option easier said than done. In private companies, board members can make their decisions among themselves and deploy actions immediately. But for public blockchains, deciding protocol changes can drag on for years as demonstrated by the years’ long scaling debate for Bitcoin.
Off-chain vs on-chain scaling—not opposite sides of the debate
The paradox is that because a blockchain owned by nobody, it is owned by everybody. This means everybody gets to have a say in it, and the pledge to democracy obliges that every viable proposal must be heard.
The absurd thing is that on-chain scaling and off-chain scaling solutions are not contenders from opposite ends of a battle — they’re actually allies against the same enemy that is network congestion.
Although building off-chain solutions enables vast possibilities for blockchain applications, limitations to a blockchain will still be met at some point as the network gains massive, global traction. This is why on-chain and off-chain scaling go hand-in-hand. A purist perspective is not the answer.
Offchain processing is like offline processes on your computer
Contrary to what some might think, blockchain applications do not need to fully operate on the blockchain. For many, it makes much more sense to combine blockchain processing with a traditional web base.
This is comparable to the way the current Internet is built. An analogy for combining off-chain and on-chain processing can be made with computers and the Internet. In the current computer-Internet system, only relevant information is communicated to the network while the rest of processes are handled by each individual computer that—although connected to the Internet, do not need this connectivity for everything it does.
There is no need to use the Internet for all these processes all the time. One can easily upload a file after it has been created instead of creating it all on a web-connected platform.
There are live, web-based applications that enable users to create online — such as Google Docs, InVision, and other similar design and document applications. But imagine if the whole world relied on Google Docs and similar live online applications for everything they could do in their computers—even industry giants will see their servers crashing.
With blockchains, similarly, complex processes and transactions do not need to be conducted on-chain in their entirety.
The beauty of cryptography is that hashing enables the compression of detailed data into a smaller file, a key that can be used on its own to verify its origin and the transactions bundled within it.
The system then only needs to sync relevant information with the blockchain once the transaction is done, leaving the blockchain free to process other transactions in the network for the most part. This way, transactions can be processed faster as it does not require the participation of the miner network.
Advantages of Off-chain solutions
Several projects are independently trying to tackle the scaling and congestion issue on Ethereum. One particular project called Loom Network is working on enabling heavy applications like games on the blockchain.
Another scaling project is that created by Dispatch Labs. The Dispatch protocol integrates off-chain storage of heavy data with on-chain smart contracts to manage the decentralized storage network.
This means that the heavy data that blockchain applications interact with are no longer on the blockchain and are kept out of the way in order to free up the network for processing relevant transactions. This solution offsets network traffic, effectively avoiding congestion and leaving blockchain network running smoothly.
Dispatch developed a nifty system of offloading application data, or “artifacts” to a network of decentralized storage providers, effectively creating an entirely new economy. In this new economy, data is stored outside the blockchain while ensuring that they are instantly accessible to the applications that need them, whenever they are needed. Additionally, Dispatch encourages community-wide collaboration for solving problems.
“The beauty of Dispatch is that I don’t have to go out and solve a specific problem in the world. I’m building a place where people can submit solutions in order to create the best answer to that problem,” Dispatch CMO Ivan Goldensohn says.
While protocol decisions can take years to arrive at, many issues blockchains face require immediate attention and solutions. This is one of the biggest benefits of off-chain scaling: there is no need to wait around for the entire community to decide and implement protocol upgrades.
Off-chain solutions enable the deployment of functionalities without having to disrupt the entire blockchain — and without having to wait for any upgrades to the blockchain. This helps avoid network-wide disruption while resolving issues quickly and in a timely manner.
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